Business RSS /bloomberg/cmlink/business-rss-1.4604160 Wed, 19 Dec 2018 00:58:35https://www.haaretz.com/israel-news/business/don-t-let-your-money-go-up-in-smoke-a-guide-to-investing-in-medical-marijuana-1.6761636
1.6761636Wed, 19 Dec 2018 00:58:35Guy ErezWed, 19 Dec 2018 00:58:30The medical cannabis industry is starting to mature. The sector garnered criticism after several companies began trading their shares on the stock market long before they had sales to speak of. At least 12 companies entered the industry.

Now the trend has shifted. In the past few weeks, companies with years of experience growing medical marijuana and developing new strains are launching on the stock market by merging with publicly traded shell companies. Finally, investors will have a real opportunity to invest in Israel’s medical cannabis market — the one that’s up and operating, not the hopeful future one. Is it a worthwhile investment?

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The cannabis stock frenzy is not unique to Israel. On the Toronto Stock Exchange, companies including Canopy, Aurora and Tilray traded at a combined market cap of $26 billion, as Canada moved toward legalization of marijuana in October. But the shares are extremely volatile and many are tens of percentage points off their highs. Their stock market valuations are completely disconnected from their actual profits.

Likewise, Israeli funds investing in these North American stocks, managed by Ayalon and IBI, saw as of October their values increase by 50% from their launch, only to have it all wiped out. IBI’s fund is now 8% lower than at its April launch.

It’s hard to argue with forecasts showing that the markets for both medical and recreational marijuana are expected to grow sharply, given the growing number of countries that are legalizing it to varied extents, the increasing acknowledgement of its medicinal properties and its mounting social acceptance.

Then there’s the fact that huge companies like Coca-Cola and the maker of Corona beer invested billions of dollars this year in marijuana companies with an eye to developing soft drinks based on CBD, a component of cannabis with medical applications but no psychoactive affects. While it’s hard to quantify the scope of the change, while the North American market for legal marijuana is worth $9.2 billion a year today, Arcview Market Research estimates that international sales will reach $57 billion by 2027.

Israel’s newest stock market players are Better and Pharmocann, which are merging with the stock market shells WhiteSmoke and Medical, respectively. Both companies have a decade of experience in Israel’s medical marijuana industry. Better has a market cap of 36 million shekels ($9.575 million) — up 48% for the year and currently 17% below its peak valuation; Pharmocann, with a valuation of 38 million shekels, is up 345% for the year and is 6% off its top share price.

And then there’s Panaxia Pharmaceutical Industries, which is merging with the stock market skeleton Herodium Investments. Panaxia manufactures a range of products from marijuana, one of just two Israeli companies with the necessary processing facilities. As a result, most of the other Israeli companies in the field are likely to be Panaxia clients. It has a market valuation of 37 million shekels, is up 112% for the year, and is currently priced 8% under its peak.

The biggest and best known company in the field is Intercure. Its current valuation is 420 million shekels, up 1,270% for the year, and is currently 7.5% off its top price. It is notable for having former Prime Minister Ehud Barak as chairman. Its current sales are based on Canndoc, a small company it bought out with 6.2 million shekels in revenues as of 2017 and 600,000 in profits. Intercure says it seeks to expand into 10 other countries.

Another player in the field is Breath of Life Pharma, whose investors include the owner of local drugstore-chain giant Super Pharm, and which owns the country’s second marijuana processing plant. Last year it had revenues of 10.8 million shekels and losses of 17 million shekels.

Four out of Israel’s eight active medical marijuana companies are slated to be publicly traded.

Yet despite the rosy forecasts for the medical marijuana industry, this doesn’t mean anything for the shares of any specific Israeli company.

Investors are right to regard the industry with some caution. One of the better known players, Together, reached a market cap of half a million shekels this year, and released dozens of announcements to the stock exchange regarding its plans to grow marijuana and its agreements in foreign countries, but is still yet to plant its first plant. Its market cap is currently 250 million shekels, 68% off its peak but still up 283% for the year. Mediway, another company that tried to ride the trend, also is yet to show any actual progress, and even its research and development contract with High Pharma was recently canceled. The company is still trading at a market cap of 115 million shekels, up 100% for the year but down 49% from its peak.

As for the companies with actual operations, the two big questions at the moment are whether they’ll receive export permits, and what the local market will look like following a Health Ministry reform. A reform scheduled for April would see the companies competing against each other over a local market that, while growing, is still relatively small. Current demand is for 10 tons of medical marijuana a year — some 33 grams a month for each of some 28,000 patients. Patients pay growers 370 shekels a month, regardless of how much they consume.

Israel has been considered a medical marijuana powerhouse for years, yet the government has been hesitant to approve exports, possibly due to fears of being perceived as an exporter of arms and drugs. For months, Prime Minister Benjamin Netanyahu has been deciding not to decide whether approve medical marijuana exports, despite professional opinions calling on him to do so. As a result, Israel has missed out on major international tenders issued by hospitals, research institutes and companies. But market players say the ministry reform will give Israel particularly advanced regulation in the field.

For the local players, export approval will mean significantly higher share prices; being limited to the local market will significantly limit the companies’ value. That said, the timing of export approval is far from certain.

While a few companies have hinted at foreign operations to bypass the need for local export approval, these statements should be regarded with some skepticism. These countries already have major companies in the field, and local consumers are likely to look for the best-known brands. The Israeli companies seem to think Israel’s “startup nation” reputation will be enough to make them global players in the field. In practice, there’s no way of knowing how much demand they’ll find abroad, once all the necessary regulatory approvals come through.

The market is likely to expand, but given the risks and the high prices of some of the shares, randomly choosing a medical marijuana company to invest in is likely to be a risky strategy. Ultimately, the companies’ valuations will need to be on par with their earnings.

“We are now in the early planning phase for manufacturing site expansions in Oregon, Ireland and Israel, with multi-year construction activities expected to begin in 2019,” the company said.

It is planning to work on permits with local governments over the next few months, it said. Expansions will take places in stages, it added.

The company declined to elaborate on the extent and implications of the expansions. However, it stated that its plans include creating new space at the factory in order to enable production of its future products.

It declined to say what these future products are.

The Kiryat Gat factory used to produce its 22-nanometer technology. In 2014 Intel decided to invest $6 billion in improving the factory in order to start producing its new 10-nanometer technology, which enables smaller microchips.

Earlier this year, it decided to invest another $5 billion in order to further increase its production capacity in Israel.

In July, Economy Minister Eli Cohen said Intel was considering investing another $9 billion in Israel. The company responded at the time that it had no such concrete plans. It’s not clear whether the current announcement is related to Cohen’s July statement.

Meanwhile, Intel has repeatedly delayed the launch of its 10-nanometer products. They are expected to hit the market only next year.

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1.6761610Wed, 19 Dec 2018 00:02:14Avi Waksman Wed, 19 Dec 2018 00:02:04Israeli businessman Walid Abulafia, one of the owners of the iconic Abulafia bakery in Jaffa, is suspected of tax evasion worth millions of shekels, and of not reporting his assets.

Abulafia was detained by the Israel Tax Authority on Monday and released after he put up 100,000 shekels ($27,000) in bail.

Abulafia, allegedly with the assistance of a brother, took control of family members’ assets, but didn’t include them in a declaration of assets. They include the Ambassador complex at the corner of Hayarkon and Allenby streets in Tel Aviv, where a tower is slated to be built. The Tax Authority alleges that Abulafia created the false impression that a Dutch company controls the complex. That company hasn’t existed since 2013.

The tax authority also believes Abulafia and other family members have money in foreign bank accounts that they haven’t reported. Based on information from U.S. tax authorities, the local taxman also believes Abulafia received some $250,000 in dividends from a foreign company he owns, and never reported it.

After requesting information from foreign tax authorities, police officers and tax inspectors raided the homes of family members and offices of the family’s accountants and businesses. Documents were seized in the searches.

Abulafia and other family members were questioned as potential criminal suspects.

In a response, Abulafia’s lawyer said his client had been questioned and that he cooperated fully. “We are fully convinced that following the investigation, it will emerge that Abulafia paid full taxes on all his businesses and interests, and the suspicions will prove baseless.”

El Al signed a code-sharing agreement with the Polish national carrier, LOT Polish Airlines, Monday night. The agreement takes effect December 20 and affects the two companies’ flights between Poland and Tel Aviv. This means that El Al can display its code on LOT flights between Krakow, Wroclaw, Gdensk, Lublin and Rzeszow, and Tel Aviv. In addition, El Al will apply its code to LOT flights from Warsaw to five international destinations, including Lvov, Ukraine; Vilnius and Kovno, Lithuania; and Talinn, Estonia. The agreement will also allow El Al to sell its passengers tickets for LOT flights, and vice versa. This year, LOT Polish Airlines flew 9 million passengers to 105 destinations around the world. (Rina Rozenberg Kandel)

Noble Energy off 40% in six months

Noble Energy’s share price is down 40% for the past six months and is now equal to its low of 2008. The U.S. company, one of the main partners in Israel’s offshore natural gas fields, has been hit by falling oil prices. The company engages in oil shale fracking in the United States, and any further price drops could make fracking in general not worthwhile. The company, whose share trades in New York, is currently trading at a market cap of $10.3 billion. Its valuation is down 70% for the past five years. (Eran Azran)

TASE follows international markets down

The Tel Aviv Stock Exchange finished the trading day with losses, in keeping with global trends. The blue-chip TA-35 index closed down 0.7% at 1,550 points, while the midcap TA-90 index dropped more than 1.6% to close at 1,398 points. Bank shares, which had bucked the trend in order to gain Monday, gained another 0.1% in Tuesday trade. Notable shares included Space Communications, which lost 10%, putting the company’s share price down 63% for the year and reflecting a market cap of only 133 million shekels ($35.374 million). The company’s CEO told investors that it can meet its debt obligations next year. (Eran Azran)

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1.6760494Tue, 18 Dec 2018 15:00:17Tali Heruti-SoverTue, 18 Dec 2018 14:13:22The agreement in principle signed by two Israeli ministers Tuesday marks the advent of a long-awaited reform at the Haifa Port. The accord, approved by Finance Minister Moshe Kahlon and Transportation Minister Israel Katz, will become a collective labor agreement within the next few months.

The agreement states that one in five employees will need to choose to depart, at a cost of 2.5 million shekels (about $664,700) per person, and that the port will be sold off in cooperation with the employees and their union.

In addition, the State of Israel agrees to forgo any dividends from the sale.

The government aims to privatize the port and sell it to a strategic owner by the second quarter of 2019. The buyer must have experience that will enable the port to improve its volume of activity.

The Transportation Ministry plans to set detailed criteria for a buyer by May 2019, in consultation with the Histadrut labor federation and the Haifa Port Company. During the first five years after the sale, the port's workers union will have the right to appoint to observers to the board of directors. After five years, the union will be permitted to appoint one observer, who will serve as an external director.

Protection from collective firing for 10 years after privatization will also be granted to the port workers, among them so-called second-generation employees hired before mid-2017 – especially contract workers – who initially received less lucrative terms of employ than their more senior, first-generation colleagues. This protection does not, however, apply to individual layoffs.

The agreement also offers workers protection should the port’s business be negatively impacted by increased competition between the years 2021-2027. Currently, most of the employees' salaries comprise bonuses earned per shift. The new reform promises workers minimum bonuses of 70% of their current average wage through 2025, a figure that will be reduced to 60% by 2027.

The clause in the agreement that encourages employees to depart by choice applies to some 200 of the port’s 1,000 workers between the ages of 50 and 64, with a minimum of 25 years' seniority at the company as of 2024. These employees will not be replaced. In return, their pension payments will be increased by 7.7%, and they will receive vacation pay that covers the number of years remaining until their official retirement date. They will also receive a grant based on their average bonuses. The port expects that the cost of the retirement scheme will be 2.5 million shekels per worker, including pension payments for those under age 67.

In addition, employees will receive a one-time grant of 50,000 shekels when the port is actually privatized.

The main source of funding for the agreement is the state's willingness to forgo dividends from the sale of Haifa Port, which will also be partially financed by a future bond sale.

The Israel Port Authority is slated to start planning a new port in Haifa, West Kishon, that will be capable of handling particularly large ships. The cost will be split between the authority and the Haifa Port.

News of the agreement sparked anger among workers at the Ashdod Port, who are far from reaching their own agreement with their employers and are concerned that the Haifa terms will be applied to them too.

“The Haifa Port is being sold for a mess of pottage,” Ashdod employees claimed.

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1.6759335Tue, 18 Dec 2018 09:09:59Eran AzranTue, 18 Dec 2018 09:09:58As Britain anguishes over its effort to negotiate a deal to leave the European Union, one Israeli is swimming against the tide and is hoping to make a fortune off Brexit. He has bought up 1,200 apartments in London over the past half year.

Yakir Gabay bought the properties for about 500 million pounds ($630 million) through his company, Grand City Properties. The real estate was purchased in cash.

A source close to the company said the properties were all bought from developers and are middle-level real estate rather than high-end. Gabay was able to buy them at a discount of tens of percent thanks to the Brexit-induced slowdown in the London real estate market.

Although Gabay lives in the British capital, up to now he has been active mainly in Germany. Grand City, which specializes in residential real estate, owns 82,000 homes in Germany and is traded on the Frankfurt Stock Exchange at a market value of 3.3 billion euros ($3.8 billion).

But Brexit provided the firm with an opportunity to move into the London market, the source said. Since Brexit, London’s housing market has dropped by one to five percent, he explained. At the same time, the pound has fallen 20 percent. As a result, many developers have stopped building new projects, and they have to sell under pressure.

That has enabled Gabay's company to sign deals at discounts of up to 30 percent. But that is only because the company is paying in cash and is solving the contractor’s problems with the banks, the source said.

It you look at the long term, he added, Brexit provided an opportunity to get into the market in Europe’s strongest city. That opportunity, he said, had last arisen in 2009.

There’s a risk that the housing market might collapse following Brexit, the source acknowledged, but there is also potential. And if there are problems, the rental market might actually benefit. The company isn’t buying to sell, he said. It's in it for the long term.

Buying at a discount also provide a certain level of protection, he added. And to limit the risk, Grand City decided to restrict its investments in London to no more than 10 percent of its asset portfolio.

While Brexit has caused a housing slowdown throughout Britain, it has been particularly marked in London. The Guardian newspaper reported this week that overall, British housing prices fell 1.7 percent in November, the sharpest drop since 2012, citing data from the real estate website Rightmove. The fall was especially steep in Britain’s wealthiest cities, including London.

Grand City is owned by another Gabay company, Aroundtown. That company trades in Frankfurt at a market capitalization of 8.4 billion euros.

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1.6759285Tue, 18 Dec 2018 08:45:51ReutersMon, 17 Dec 2018 22:21:28A Glencore PLC-controlled mining company and some of its current and former executives have agreed to pay more than $22 million to settle Canadian allegations that they hid the risks of doing business with Dan Gertler, an Israeli close to Congolese President Joseph Kabila, the Wall Street Journal reported on Sunday.

The expected settlement between the Ontario Securities Commission and Toronto-listed Katanga Mining is related to the company’s business activities in the Democratic Republic of Congo between 2014 and 2016, the Journal reported, citing an anonymous source.

The Canadian regulator is expected to name several of Katanga’s current and former executives in the settlement and will focus on Katanga’s ties with Gertler, who first invested in Katanga alongside Glencore in 2008, the report said.

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1.6758977Tue, 18 Dec 2018 08:45:50Assa SassonTue, 18 Dec 2018 08:45:44For more than 20 years starting in 1961, the Israeli government required citizens to lend it money in times of crisis, when it suddenly was confronted with unexpected and costly crises like the 1973 Yom Kippur War.

But the loans were never repaid. Indeed, the state stopped paying interest and inflation-linkage on them in 2012, 15 years after the last of the loans, which were taken during the First Lebanon War in 1982, were supposed to have been repaid.

An estimated 300,000 Israelis who lent the state money in those years, a sum now estimated at 500 million shekels ($133 million), not only haven’t been repaid, but the value of the money is being constantly eroded.

Now a non-profit organization Tzedek Financi (Financial Justice) is seeking to get it back through a class action suit. What it has found out so far from the government’s response is that officials have done nothing to try to locate the lenders and return their money.

Government attorneys contend that it’s up to the lender to identify themselves if they want their money back.

“The responsibility for redeeming the loans applies, under the lending laws, to those who made the loans, and the relevant legislative provisions set dates and ways of redeeming the loans that the lenders have to follow,” the government said in response to the lawsuit.

The claim is doubtful because the government requires private sector financial service companies, like banks and insurers, to find clients they have lost touch with over the years.

Indeed, the genesis of the Financial Justice lawsuit was the fact that two women, Ora Bar and Shoshana Viner, used a treasury program to help people find lost financial assets at banks and insurance companies. The treasury’s Har Hakesef (Money Mountain) website also included information on the compulsorily loans, which the two had made to the government during the years 1961-1982.

The two realized they were not the only ones who had forgotten about the loans and turned to Financial Justice for help with a class action suit.

In principle the Bank of Israel, which holds the money, has said it will seek to find 4% of the lenders every year, with the goal of finding all of them within 25 years. In practice, in the last 15 years it has issued no written appeals at all.

The loans came in two forms – one strictly compulsory in the form of deduction directly from paychecks that were invested in bearer bonds. The bonds were not negotiable. Other loans were somewhat more voluntary in the sense that the lender had the right to refuse – although he or she had to refuse rather than opt to lend the money.

In defending itself against the need to find the lender, the government is arguing that the compulsory nature of the loans means they aren’t really investments at all.

“These were not voluntary investments made by the public but an obligation made under the law and mandated by the state. ... There is no issue of investor protection or of a voluntary loan,” it told the court.

The government argues that the voluntary loans also don’t count as investment. “The voluntary loans were made out of generosity to the state in its hour of need … It should be noted that at the time a minority refused to volunteer their money,” it said.

Needless to say, Financial Justice doesn’t buy the argument. “You can’t call the situation anything but completely absurd,” it said in court documents.

“The state raised funds from the public and promised a return on the investment. This is a financial investment in every respect, which is essentially similar to a debenture (and as mentioned, the loan law is explicitly defined as a “bond”). The state certainly did not prove that the lenders did not expect to receive money in the future,” it said.

The two sides are due to meet in court this week to see whether Financial Justice class action suit will be recognized.

Israel’s high-tech industry is at risk from the big Wall Street downturn this year, IVC Research Center warned in a research note issued on Monday. The tech-heavy Nasdaq Composite index is down 14% from its August high and leading stocks like Facebook and Amazon have fallen even more. IVC noted that in the last two big global financial crises in 2000 and 2008, the impact on the local high-tech market was severe. By 2003, funding for Israeli startups had dropped 57% from its 2000 peak; in 2009 the decline was more than 35% from the year before. Venture capital funds had trouble raising capital as well and the recovery time for them was much longer, IVC figures showed. After the 2008 crisis, VC fundraising only recovered in 2011. “Should Israel’s high-tech industry be concerned? It’s a bit too early to say,” IVC said, adding that the impact, if it happens, is likely to start in the second half of 2019. (TheMarker Staff)

Israel to spend $26.5 million on quantum mechanics research

Israel cabinet on Sunday approved a 100 million shekel ($26.5 million) program to advance the field of quantum mechanics. The program will involve collaboration between the Defense Ministry’s Directorate for Research and Development of Weapons and Technological Infrastructure, the Council for Higher Education and the Israel Science Foundation. Three quarters of the money will be used to support top researchers in the field at Israeli universities and the rest allocated by the Defense Ministry.”The innovative research fund will continue to place Israel at the top of global technology and research. From being a cyber-security power to being a quantum power, we will continue to lead significant breakthroughs for the State of Israel,” Prime Minister Benjamin Netanyahu said. The subjects to be included in the program are quantum computation and communication, simulation by quantum systems, quantum instruments and sensors, quantum material and new quantum technologies, the government said. (Irad Atzmon Schmayer)

K Health raises $25m for diagnosing app

K Health, which has developed an app that uses artificial intelligence and health records to help users diagnose health problems, said on Monday it had secured $25 million in new capital. The investors, led by 14W, Comcast Ventures and Mangrove Capital Partners, with Lerer Hippeau, BoxGroup and Max Ventures joining in, had all previously put money into the company. Cofounded by Allon Bloch, who was previously CEO of the website-design company Wix.com, K Health provides consumers with a free application that provide personalized, data-driven information about their symptoms and general state of health, focusing on primary care. The company was founded two years ago and raised $12.5 million in July. Bloch told the tech website Venture Beat that the proceeds will be used to launch virtual physician visits in next year over the app. K Health also plans to make available doctors to adult users for a fee-based consultation over the app. (TheMarker staff)

Avanan raises $25m for cloud cybersecurity

Avanan, which helps companies secure Office 365 and other software-as-a-service applications from phishing attacks, malicious content, data leakage and account takeover, said Monday it had raised $25 million in new funding. The money all came from existing investors StageOne Ventures, Magma Venture Partners and Greenfield Partners, who put $15 million into the company in May 2016. What Avanan says sets it apart from competitors is its platform, which allows customers to pick and choose security technologies from the leading vendors in the industry. Avanan said customer base has increased 10-fold in the last 12 months, protecting over one million end-user accounts in organizations. Founded in 2014, Avanan has raised $41 million to date. It has 60 employees equally split between its New York headquarters and its Tel Aviv research and development center. The company said the new capital will be spent in part in hiring 10 new staff in Israel. (Irad Atzmon Schmayer)

Bezeq said on Monday it expected 2018 annual profit would fall sharply after approving a plan to give early retirement to 337 workers at a cost of 512 million shekels ($136 million). That would come on top of the 90 million shekels set aside in the first and second quarters for early retirement, reducing 2018 net profit by 464 million shekels, it said. The job cuts will be in Bezeq’s parent company, which operates its core landline telephony business. But Barclays analyst Tavy Rosner said he expected further cuts to follow. “We estimate that there is significant room to decrease the workforce at Bezeq’s three other divisions,” said Rosner, who estimated the company can cut 19 percent of its workforce. The cutbacks come amid growing competition and management chaos at Bezeq, which is at the center of government investigations for security and other violations. Bezeq shares ended down 1.85% at 3.88 shekels. (Nati Tucker and Reuters)

Gazit Globe and Norstar recover, but worries persist

Shares and bonds of the property company Gazit Globe and its parent Norstar recovered on Monday after a big sell-off a day earlier on the Tel Aviv Stock Exchange. Gazit shares ended up 1.8% higher at 28.64 shekels, with its bonds gaining as much as 1.28%, while Norstar stock advanced 1.7% to 48.50 and its bonds up to 1.2%. Nevertheless, Gazit is still down 20.5% and Norstar by 34% so far in 2018. Relating to Sunday’s drops, controlling shareholder Haim Katz said, “We don’t see any reason for the declines. There has been no unusual event in the group. We are doing business as usual and implementing our strategic plans.” Since the start of the year, Gazit has moved to hold its real estate directly, rather than through subsidiaries, and is reducing its debt. But investors appear to be worried about climbing interest rates and the impact of growing online shopping on Gazit’s malls. Short sellers have added to the pressure. (Guy Erez)

Spacecom, the trouble operator of the Amos satellites, was dealt another setback on Monday when Yes said it would not use Spacecom’s planned Amos 8. Yes, the satellite television unit of Bezeq, said it didn’t believe Spacecom would be able to put Amos 8 into orbit by the deadline set in a contract between the two companies. Spacecom has accounted for 40% of Spacecom’s annual revenues from its use of the Amos 3 and 7 satellites. Launch of Amos 8 has been delayed after Spacecom was forced to break off a contract with America’s Space Systems/Loral to build the satellite. Spacecom is expected to award the work to Israel Aerospace Industries, which won’t be able to complete the satellite as quickly. Like Bezeq, Spacecom was controlled by telecoms tycoon Shaul Elovitch until he lost control of his businesses due to debt and police investigations. Spacecom shares ended down 3.8% at 7.11 shekels ($1.89). (Guy Erez)

Early Tel Aviv shares gains wilt after Wall Street opens lower

Tel Aviv shares made a mighty effort on Monday to recover from a sell-off a day earlier, but with Wall Street sliding 1% in early trade, shares moved into minus in the final two hours. The result was the TA-35 index finished 0.25% lower at 1,560.98 points, while the TA-125 loss nearly 0.3% to 1,411.78, on turnover of 1.23 billion shekels ($330 million). Among the biggest losers, Teva Pharmaceuticals dropped sharply for a second day, losing 3.6% to 67.30 shekels. The stocks has lost nearly 17% in the past two weeks. B Communications dropped 6.75% to 26.51 and Israel Chemicals by 1.5% to 20.23. Bank shares were higher, with volume leader Leumi gaining 1.9% to 23.53. Pointer Telocation rose 4.5% to 45.44 after reporting it won an $8.5 million contract, its largest ever, for vehicle fleet-management technology. In foreign currency trading, the euro strengthened more than 0.6% to a presentative rate of 4.2843 shekels. (Assa Sasson)

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1.6759304Tue, 18 Dec 2018 06:18:04Avi Waksman Mon, 17 Dec 2018 22:34:49The Yellow Vest protests in Tel Aviv Friday against the high cost of living hadn’t broken up when the Central Bureau of Statistics released its latest inflation report showing that prices fell 0.3% in November.

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Seven years after the social-justice protests, the high cost of living remains a frequent topic of discussion in Israel. “Prices are rising,” scream the headlines, but the reality is that the consumer price index, which reflects how prices are moving, has barely budged in recent years.

Since July 2011, when the protests were underway, the CPI has risen just 3.9%. That's low inflation over an extended period, and many categories of prices have fallen. If the Bank of Israel had managed to keep inflation in the government’s target range (an average of 2% a year), prices would have climbed 15% in the seven years.

But the CPI doesn’t measure the cost of living. It tells you how much prices have changed for a designated basket of goods and services. It doesn’t tell you how high the cost of living in Israel is compared to other countries, or how high prices are compared to incomes.

It also tells you nothing about the future direction of prices, while the latest headlines about price rises talk about increases that are about to come. The big increase in electricity and water rates are due to take effect in January, as are higher prices for dairy products and bread. Their impact will only appear in the January CPI published in February.

Comparing prices in Israel with those abroad tells a different story than the CPI does about the cost of living. The price of the popular dessert Milky costs twice as much in Israel as does the equivalent product in Berlin.

Online shopping has made it easier for Israelis to compare prices, as has the big increase in Israelis taking holidays abroad. This often makes consumers feel they're being ripped off.

But that doesn’t mean the comparison is always fair. That’s especially the case in one-on-one comparisons, which don’t necessarily reflect things like product quality, differing incomes between countries and exchange rates.

To help cope with the problem, economists use purchasing power parity, which looks at the cost to buy a fixed basket of goods and services across different countries. The Organization for Economic Cooperation and Development publishes comparative price levels monthly, based on consumer spending, inflation and exchange-rate changes.

For October, the index shows that a basket of goods that would cost 100 shekels ($26.50) would cost 97 shekels in Australia, 84 in Austria, 54 in the Czech Republic and just 32 in Turkey. Only four OECD countries have higher prices by that measure than Israel – Switzerland and Iceland, both at 118 shekels, Norway at 108 and Denmark at 109.

Exchange rates distort these comparisons; for example, with Turkey, where the lira has collapsed. Moreover, prices among countries vary by product and service. Thus in 2014 OECD figures showed Israel 22% more expensive on average, but some items like apparel and fresh produce were lower in Israel than the OECD average.

Also, people are bad at estimating their income and outgoings. When the prices of high-profile products and services go up and the media covers it, people tend to perceive it as if all prices were going up.

Average Israelis are attuned to every change in the price of cottage cheese but not to the price of the table they're eating it on. The price of furniture in Israel has plummeted in recent years, but the modest increase in the prices of dairy products has received far more attention.

The ability of households to spend isn’t just a matter of prices but also of income, and here the picture is quite clear. There are many ways of calculating household income, but by most of them Israel’s is low by developed-country standards – below that of Western Europe, Scandinavia and North America.

The good news is that Israeli incomes are rising quickly. Household cash income (before taxes) rose 4.5% in 2017, the median wage for salaried earners last year rose at its fastest pace in 15 years or more, and the minimum wage was lifted twice in 2017 at a time when more Israelis than ever are in the workforce. In fact, pay is rising much faster than consumer prices.

Sources told TheMarker that treasury officials were looking for way to delay and moderate a sharp rise in electricity rates, which could reach as much as 8% or even more, in January.

Over the weekend Kahlon announced that he was extending a series of customs and purchase tax exemptions on a host of consumer goods that were due to expire December 31. The move comes as a host of businesses have announced price rises in the last few weeks, most recently a request by bakeries to raise controled bread prices 3.4%.

That followed a joint announcement by Kahlon and Economy Minister Eli Cohen on Thursday naming Prof. Yaron Zelekha, a former treasury official known as a consumer advocate and critic of business, to head a panel exploring policies for bringing down the high cost of living.

Zelekha’s appointment, however, came under criticism from the Finance Ministry legal adviser due to what he said was Zelekha’s conflicts of interest as an adviser to labor unions.

Kahlon is being confronted with a wave of price hikes both in the business sector and from state-owned monopolies in power and water. They threaten to undo his reputation as a consumer advocate dedicated to bringing down the cost of living through industry deregulation and lower taxes just months before his Kulanu party is likely to face the voters.

On Sunday, sources in the power industry told TheMarker that Finance Ministry director general Shai Babad would be holding an urgent meeting of treasury and Electricity Authority officials to discuss ways of moderating the hike in power rates.

The increases could cost consumers as much as 2 billion shekels ($530 million) annually, according to Electricity Authority estimates. Independent experts have said the rise will be greater than the authority estimates because it includes a new component that charges users for infrastructure costs for the first time.

Kahlon reportedly wants to spread out the rate rise over several years, out of concern not only for the impact of the hike itself but because it will percolate through the economy and raise prices for other goods and services.

Sources said the authority opposes spreading out the increases, saying it would only delay the inevitable. In any case, electricity rates will have to rise again in 2020 because of the rising price for the natural gas that powers most of Israel’s generating plants, as well as the introduction of higher-cost renewable energy to Israel’s energy mix.

Electricity Authority officials, with backing from energy and finance ministry officials, have proposed instead reducing the fuel that tax power companies pay. Treasury officials said another option was to reopen the contract for natural gas between the gas cartel and state-owned Israel Electricity Corporation in 2019, instead of 2021.

Politicians rarely interfere with decisions by the Electricity Authority, which is answerable to the energy minister but generally acts independently and sets rates based on the expected cost of electricity.

Meanwhile, Kahlon said the customs and purchase tax exemptions worth about 1.5 billion shekels a year to consumer would be extended another year.

The exemptions, which were originally unveiled under Kahlon’s “net” programs cover a wide range of good from smartphones and refrigerators to shoes and cosmetics. They normally are taxed at rates ranging from 6% to as much as 30%, although most were in the 12% to 15% range.

Extending the exemptions had been under discussion for a long time in the treasury and Israel Tax Authority inconclusively. Until Kahlon’s announcement over the weekend, importers and retailers were gearing up to raise prices when they expired.

Before the exemptions, smartphones in Israel were among the most expensive in the world because of the 15% purchase tax combined with the 17% value-added tax.

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1.6748208Mon, 17 Dec 2018 06:23:06David RosenbergMon, 17 Dec 2018 05:53:50The last week has been the most difficult ever for Finance Minister Moshe Kahlon since he took office in 2015. The wave of price hikes have been focused in the public sector – namely, electricity, water and municipal taxes. That, in turn, has given the business sector the freedom to raise its prices. After all, if the government is allowing itself to raise prices, why can’t we?

On the other hand, Kahlon had one ray of light to savor: The Central Bureau of Statistics reported that income inequality, as measured by the Gini coefficient, has been getting better. It’s not only getting better, it’s at its lowest in the past 20 years. The Gini index fell to 0.351 last year from 0.359 in 2016 and a record high of 0.390 in 2006 (on a scale of 0-1, with 1 being the most unequal).

There are many reasons for the decline, some of them connected with government efforts that Kahlon accelerated when he became finance minister. They include raising the minimum wage, expanding the negative income tax program and bringing more Haredim into the labor force (although the last year has seen the trend plateau).

Kahlon was also responsible for the cap on salaries of 2.5 million shekels ($660,000) for executives in the financial services industry.

>> Cost-of-living protest leaders target Osem

The good news on income inequality, however, is limited: Israeli still has the biggest gap of any developed economy and very high levels of poverty. To change that requires a big increase in the percentage of ultra-Orthodox men and Arab women in the labor market.

You can reduce income inequality with government allowances, but government policy over the last two decades has been to cut such allowances in order to encourage more people to get jobs. That has not only succeeded - it has succeeded at the same time that the unemployment rate is at a low of 4%.

Some people would argue that the jobless rate is misleading because it includes many people who are working part time. If they manage to stay above the poverty line, it’s just above the line and no more. The recent spate of price rises could undermine one of Kahlon’s chief accomplishments by pushing many of those marginal households below the poverty line.

The November consumer price index fell 0.3%, but it reflects the trends of the past. The next few months will show something different after decisions were made to raise prices for power, water and municipal taxes as well for many food products.

A discussion about how to moderate or roll back the price rise in the public sector, where electricity rates are due to go up as much as 8% and water rates by 4.5% starting in January, won’t help Kahlon.

He is trying to convince the Electricity Authority to avoid a rate hike, arguing that in 2021 the contract Israel Electric Corporation, the government-owned electricity monopoly, to buy natural gas from the Tamar field can be re-opened (the IEC is trying to re-open it even earlier). At that point it will be possible to lower the price IEC pays for gas by 25%, meaning rates for consumers will go down.

In the meantime the treasury is exploring ways to prevent the rate hike from happening in 2019 and compensating IEC for this in subsequent years’ tariffs. In other words, in 2019 the IEC will absorb the increase in costs and the following year, when gas is hopefully cheaper, rates will remain the same. If he succeeds, Kahlon will have moderated the price pain.

The problem for Kahlon with the inequality figure is that no one really cares about it. They do care about the cost of living. It can even spur protests as it did last week. Kahlon has no authority over electricity prices, but he may be able to use the protests to pressure the Electricity Authority.

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1.6748192Mon, 17 Dec 2018 05:05:00Refaella GoichmanMon, 17 Dec 2018 04:45:46Fifth Dimension, an Israeli security-technology startup that counted former top Israeli security officials in its ranks, has shut down after a key backer, the Russian oligarch Viktor Vekselberg, failed to transfer all the capital he had committed to putting into the company.

The United States imposed sanctions on Vekselberg and his Renova Group last April to punish Moscow for suspected meddling in the 2016 U.S. election and other alleged “malign activity.”

His venture capital fund Columbia Nova Technology Partners was among a handful of investors that had invested more than $50 million into the Fifth Dimension since it was formed in 2014.

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“Not only could he not deliver the money he promised, but his presence on the list of company shareholders at a time when his foreign assets were being blocked by the U.S. treasury prevented any other venture fund from coming in as an investor,” said one Fifth Dimension executive, who asked not to be named.

Vekselberg’s role in the company had created other problems for Fifth Dimension, including the collapse of a deal by it by another Israeli security-tech company, NSO, last November.

“The sale to NSO would have been good for both sides but it didn’t happen,” said the source, who blamed NSO’s controlling shareholder, the U.S. fund Francisco Partners, for blocking the deal.

Fifth Dimension counts several former leading Israeli defense establishment figures, including former army Chief of Staff Benny Gantz, who is chairman, and Ram Ben-Barak, a former deputy head of the Mossad, who is member of its advisory board.

Apart from the problems created by Vekselberg, Fifth Dimension had encountered problems selling its intelligence-gathering technology to foreign governments.

Designed for civilian law enforcement agencies, it raised problems of invasions of civilian privacy. The company had been working to solve the problem, but one of its two founders meantime left and its workforce shrunk by two third from a peak of 100.

Sources said Fifth Dimension’s technology, which uses artificial intelligence to sift through masses of varied data, was excellent and that it would try to sell the intellectual property to another company.

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1.6748083Mon, 17 Dec 2018 02:47:14Lee YaronSun, 16 Dec 2018 23:07:55The leaders of the protests against the high cost of living and planned price hikes called Sunday for consumers to boycott the Osem food company because it is raising prices. Playing on the company’s advertising slogan, the leaders said: “It’s robbery – It’s Osem” and called to leave the company’s products on the shelves until Osem announces it is canceling the price increases.

A demonstration will be held on Saturday night across from the government office complex in Tel Aviv, with other protests to be held around the country. As in previous protests, the organizers have called on participants to wear fluorescent yellow safety vests, inspired by the mass – and violent – protests in France.

>> One in Five Israelis Live in Poverty, Report Finds ■ Israelis Face Big Hikes in Electricity and Water Bills

“On Friday, we proved that the tycoons and monopolies cannot decide for themselves harsh decisions that the public will accept in silence,” said the chairman of the national students union, Ram Shefa. “We will simply not let it happen. This battle will continue for as long as the government does not intervene and stop the economic decrees.”

Meanwhile, the Israel Association of Social Workers announced it is calling full strike for Monday. All welfare services in Israel will be on strike in protest over the continued crisis in the welfare services, said the union. Municipal welfare departments will be closed, social workers will not provide the courts with their evaluations, no committees will meet on matters of at-risk children, and centers for the treatment of domestic violence will not operate. Neither will social workers provide services to the public at the Social Affairs Ministry – including probation officers and social workers in the education system, National Insurance Institute, health system, hospitals and HMOs, and mental health clinics will also be on strike.

A protest march in support of the social workers will start from the government compound in Tel Aviv at 11 A.M. on its way to Rabin Square, where a rally will be held.

Last month, the social workers union began taking protest actions as part of their demands to improve their employment conditions, including improving their personal security in their workplaces and reducing caseloads.

Labor, Social Affairs and Social Services Minister Haim Katz called on the social workers to give negotiations a chance and call off the strike, which he says will hit the neediest the most. “I support improving the employment conditions of the social workers, but shutting down all the welfare services is a mistake that cannot be used when the door is open and the interests are identical,” Katz said.

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1.6744822Fri, 14 Dec 2018 22:44:29Rami HipshFri, 14 Dec 2018 22:44:08In the 1980s, when the West Bank settlement enterprise took off, the leading slogan to attract home buyers was “five minutes from Kfar Sava.” The ads promised spacious single-family homes in a rural setting for a low price. In addition to towns such as Ariel, Betar Ilit, Efrat, Immanuel, Ma’aleh Adumim and Modi’in Ilit, small communities were established in which each buyer received a half-dunam (around 5,450 square feet) plot on which to build their dream home.

There’s a new slogan now, “East Gush Dan.” The Yesha Council of Settlements has for some years been marketing the settlements of the West Bank as being near major roads and transportation arteries and job hubs — 10 minutes from Route 6 and not too far from both Jerusalem and the Tel Aviv area. Now, large apartment complexes are being built to attract new residents across the Green Line.

One example of this trend can be seen in Kedem. Harei Zahav, a developer with projects in 20 West Bank settlements, is aggressively marketing a 900-unit project here. Ads for the project, aimed primarily at young religious families, describe Kedem as a new community. But Kedem is not really a separate community; it is a new densely-built neighborhood of Avnei Hefetz, a settlement of 500 families in private homes, 4 kilometers southeast of Tul Karm and 15 kilometers from Tzur Yitzhak. When the new neighborhood is fully occupied, it will change the character of the entire community.

“The city plan that was suitable 20 or 30 years ago included one- and two-family homes. That won’t work anymore,” says Harei Zahav CEO Shlomi Vermstein. “There isn’t a lot of land for building, and people understand the need for high-quality, high-density housing. This is also what draws new residents to the area.”

>> Co-opting a fetus for their land grab | Opinion

Some Palestinian communities, contending with the expansion of the Jewish settlements and outposts, have also begun to build higher.

“Boundaries were set for the village beyond which you can’t build, so we’re building up,” says A. of Al-Luban, a village near Beit Arye, where three-story buildings are visible. “We’re farmers, we like to live on the ground, but there’s no other choice.”

Lessons of the disengagement

The Kedem project is one of several high-density construction projects in the West Bank that have gained broad support from the Yesha Council, the administrative body for Jewish communities in the West Bank. It also receives massive aid from Amana, the Gush Emunim settlement movement, which has similar construction projects of its own. The two organizations shifted their focus after the 2005 disengagement and the evacuation of settlements in the Gaza Strip and in northern Samaria. A year later, Yesha Council leaders began putting together an alternative plan and new vision: 1 million residents in Judea and Samaria.

Building in the West Bank often comes up against problems, such as the government’s construction freeze policy and legal battles over homes built on Palestinian-owned land, that led to the evacuation of Amona and of buildings in Netiv Ha’avot and Beit El and led the Yesha Council to seek to comply with approved master plans and to maximize construction possibilities.

Once this vision was consolidated, the Yesha Council set out to convince two audiences, the government and the Israeli public. In June 2017, the Knesset Interior and Environment Committee held a special session marking the 50th anniversary of the Six-Day War and of settlement in Judea and Samaria. Only a very small number of MKs attended: then-committee chairman David Amsalem (Likud), Eitan Broshi (Zionist Union) and Housing Minister Yoav Galant (Kulanu).

Present in much greater numbers were Yesha Council officials and the heads of West Bank communities, who came prepared with new thesis: Rather than talk of territories and settlements, talk about the new Gush Dan. Gush Dan East.

The plan was backed up with economic data. The Yesha officials commissioned a study based on the average price of a four-room apartment in Greater Tel Aviv at the time, 1.7 million shekels ($451,500). The average price of a four-room apartment in the area bounded by Karnei Shomron, Ariel and Modi’in Ilit was 1.3 million shekels. According to the Yesha Council’s calculations, 67,000 new housing units, for 340,000 people, could be built in a belt east of the Sharon, Gush Dan and Modi’in.

“If we just look eastward, we’ll find the solution just a 10-minute drive from Gush Dan,” Yesha Council deputy head Yigal Dilmoni said after the meeting. “Western Samaria has a diverse population and is suitable for religious, secular and ultra-Orthodox Jews, and without any special effort, but just by advancing building plans, tens of thousands of housing units could be built. An eastward-looking planning approach is what the government needs to adopt.”

Opposition at home

Early signs of this change in approach can be seen in Leshem, a religious community next to Alei Zahav, an old and largely secular settlement in southwestern Samaria near the Palestinian village of Deir Balut. Leshem has some one-family homes, but consists mainly of terraced apartment buildings, unlike Alei Zahav and Peduel. Ariel is about 15 kilometers to the east, approximately the distance between Herzliya and Tel Aviv.

“There’s great momentum here,” says Vermstein. His company, Harei Zahav, is also in charge of this project. “People are moving to Leshem for the quality of life, and because it’s just 10 minutes from the main traffic arteries. Other communities in Samaria are also not far from Route 6. Kedem is 10 minutes from Route 6 and even Mevo Dotan, which is considered more isolated, is just a 20-minute drive from Route 6.”

Leshem is filling up fast, as are other towns and communities between Leshem and Ariel to the north and around Modi’in Illit, which are all in the process of shifting to high-density building. One of these places is Beit Arye-Ofarim, where the high-rise construction was not warmly welcomed.

In September, signs were posted at the entrance to Beit Arye and on the roads to it announcing the construction of a new neighborhood, Nofei Dan. Some 515 housing units are planned for this new neighborhood, south of Ofarim, including one-family homes and terraced apartments. The project is slated for inclusion in an upcoming Mehir Lamishtaken lottery, with 20% of the apartments earmarked for young people from settlements in the area. The project was one of the main campaign issues in November’s mayoral election in Beit Arye. The winner, Yehuda Elbaum, who unseated Avi Na’im, promised to change the mix of the project and not allow high-density construction that would change the community’s character.

The change in community character is a significant challenge for the Yesha Council. It launched an information campaign in settlements and media outlets associated with the right and the settlers. In a column in the newspaper Makor Rishon in February, Yesha Council Chairman Hananel Dorani wrote: “Looking ahead, the patterns of thinking and action in the settlement movement need to be changed in two main areas: high-rise construction and doing away with admission committees. The available land for building is not plentiful. Until now, we’ve been used to rural communities with a one-family home on a half-dunam plot, but the goal from now on should be to build as many housing units as possible on that same land. High-density construction — building up or in a terraced fashion, depending on topography — will change the balance in the area and also require a new approach to infrastructure development to suit the number of residents in the future.”

The Yesha Council wants to eliminate the admission committees, believing they slow down building projects. “We’re trying to convince communities to accept everyone,” says one council member, who asked to remain anonymous. “It’s not easy, and there’s opposition, but settlements need not be limited to religious and right-wing [people]. It should be opened up to all.”

Vermstein agrees. “Most of the people who buy a home in a settlement ... live between Hadera and Gedera,” he says, referring to the towns that traditionally marked the northern and southern boundaries, respectively, of central Israel. They “are looking for a place with a high quality of life and good prices. They’re looking for a community. A small portion are from Judea and Samaria. We sold 150 three-room apartments at 690,000 shekels. These are apartments that have the potential for the addition of two rooms, so young couples can break walls and enlarge the apartment. The sales were very successful.”

According to the Yesha Council, the Jewish population in the West Bank is 435,000, with a large portion in the big towns. There was 3.4% growth in 2017 — down 0.5% from 2016, but significantly above the 2% growth of Israel as a whole. In the past decade, the Jewish population in the West Bank rose 4.5%. Some of this growth is attributable to the ultra-Orthodox population in places like Immanuel, Betar Ilit and Modi’in Ilit. A smaller part comes from families joining new projects.

Infrastructure problems and traffic

The developers, community heads and Yesha Council officials want to guarantee that the high-density construction is accompanied by open spaces and large parks. Yet, as with communities within Israel proper with accelerated development (such as Rosh Ha’ayin, where traffic became a serious problem before Route 444 was widened), infrastructure is also a problem in the West Bank.

The main issue is traffic. The vast majority of Israelis living in the West Bank work in Jerusalem, Greater Tel Aviv or the Sharon, just north of Tel Aviv. At peak traffic hours, they join the tens of thousands of others all headed for these places. By 6:30 A.M., the major roads in the West Bank are pretty clogged.

Yesha Council officials say they are working with the government on the infrastructure problems, adding that there are plans to build “bypass roads,” such as a detour around the Palestinian town of Hawara, and to widen the “tunnel road” from Gush Etzion to Jerusalem. “It will take time of course, but we certainly won’t be able to get far without major attention to infrastructure.”

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1.6744795Thu, 13 Dec 2018 21:54:36Lior DattelThu, 13 Dec 2018 21:54:21Some 20% of families in Israel live in poverty, according to the “alternative” annual poverty report published by the food security NGO Latet Israel, released on Wednesday.

The organization publishes its poverty report as an alternative to the official report published by the National Insurance Institute.

Some 533,000 families in Israel live in poverty, which is 21% of all families in the country, reports Latet.

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This includes 1 million children, or 35.6% of all children in the country.

The report is based on a survey conducted among a representative sample of the population. Respondents are questioned on their financial well-being, including food purchases, health, education and cost of living.

By this measure, there are 542,000 more people living in poverty in Israel than found in the official NII report, which is due to be published soon.

Some 8.4% of households said they face a serious lack of goods and services due to the high costs in Israel, and acknowledged that they pay their bills late and have had their water and electricity cut off, and are facing debt-collection pressure, lawsuits and eviction notices. They also stated that they lack clothing and shoes in good condition, and can’t heat their homes in the winter.

Another 11.3% of households said they face a moderate shortage of goods and services due to high prices. This affects their ability to cool their homes in the summer, and to go out for entertainment at least once every three months.

The report also states that some 6% of children from the families that the NGO supports have had to beg for donations, and another 6% have collected food from the ground or garbage bins. Some 5.4% of children from families receiving Latet support have been driven to steal food.

A full one in four children from families receiving support frequently go to school without a packed lunch, and one in three have said they have to skip meals due to a lack of food.

Some 23.6% of the children in families Latet supports say they go hungry because their parents cannot afford food.

State-run defense contractor Israel Aerospace Industries said Thursday it was working with authorities to implement a government decision to issue a minority stake on the Tel Aviv Stock Exchange. IAI, which makes unmanned air systems, land and space systems and commercial aircraft, said in a statement there was no certainty an initial public offering will take place. Israeli media reported that the offering of a 25 percent stake would raise some 3 billion shekels ($800 million), valuing IAI at 12 billion shekels. An IAI spokeswoman declined to comment on the figures. In early 2017, IAI told Reuters it sought a share offering of 20 percent to help it finance acquisitions. At the time, IAI was valued at $3-$4 billion. (Reuters)

Teva Pharm to move headquarters to Tel Aviv

Israel-based Teva Pharmaceutical Industries said on Thursday it was moving its headquarters to Tel Aviv as part of a global restructuring. Teva, the world’s largest generic drugmaker, said its new base will replace a number of sites located in the area of Petah Tikva. The move, it said, “will be an efficient and cost effective solution, generating significant savings from a business and operations point of view.” Teva has been restructuring itself over the past year to deal with its massive debt, including lay-offs, site closings and the combining of divisions. It expects to move into the new Tel Aviv headquarters in mid-2020. (Reuters)

TASE finishes week slightly above water

The Tel Aviv Stock Exchange finished the final day of the trading week mixed with a positive bias, led upward by bank shares, which gained 1% on Thursday. The blue-chip Tel Aviv-35 Index gained a mild 0.1% to close at 1,596 points, while the broader Tel Aviv-125 Index gained 0.1% as well to close at 1,441 points. Oil and gas shares lost 0.4%, while real estate shares closed more or less unchanged. Notable shares included Elco, up 7%; Electra Consumer, up 5.8%; and Malam Team, up 5.6%. Shares that lost ground included Delek Automotive, down 4.5%; Blue Square Real Estate, off 2.9%; B Communication, down 2.5%; and Meitav Dash, off 2.4%. Total turnover was 1.185 billion shekels. (Shelly Appelberg)

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1.6744510Thu, 13 Dec 2018 19:21:43David RosenbergThu, 13 Dec 2018 17:28:12Israelis are supposed to be smart. We’ve won more than our fair share of Nobel Prizes and are home to a disproportionate number of top-ranked universities. Startup Nation is all about smarts.

Unfortunately, the only concrete evidence of Israeli mental skills that exists shows exactly the opposite – namely that, compared to people in other developed countries, we lack basic literacy, numeracy and problem-solving skills.

The issue of what constitutes intelligence is riddled with controversy, and even if you accept IQ as a reasonable measure, there are no international comparisons.

But organizations like the Organization for Economic Cooperation and Development routinely measure the skills of children, teens and adults for their abilities in fundamental, job-related skills.

They paint a distressing picture of Israeli mediocrity.

In the OECD’s latest PISA exam, conducted in 2015, Israeli 15-year-olds performed worse than their peers in most other countries surveyed. In science, their score was 467 versus an OECD average of 493. In reading it was 479 versus 493, and in math 470 versus 490. The top countries scored 535 and more.

Israeli adults perform badly as well. In the OECD’s PIAAC survey of people ages 16-65, only 8.5% of Israelis scored at the highest two of five levels for literacy, versus 10.6% on average for member countries. On numeracy, only 10.3% of Israelis scored in levels 4 and 5, versus an OECD average of 11.2%. Nearly a third of Israelis don’t have the skills to solve problems in what the survey calls a “technology-rich environmental” that requires basic computer skills. Across the OECD, those lacking the skills amounted to just 28.9% of the working-age population.

The fact is that Israel’s Nobel Prizes and paradigm-breaking startups are the work of an elite minority. Israeli may be known as Startup Nation, but only about 8% of the Israeli labor force is employed in it.

The rest of the economy is characterized by everything Startup Nation is not. It’s uncompetitive in global markets and technologically lagging. Labor productivity, which to a large degree depends on the skill levels of workers, is low except in the tech sector and in a few other export-oriented industries.

The reason Israelis perform so poorly in above-the-neck functions has a lot to do with the schools, which suffer low levels of discipline, large classes, poorly designed curricula and weak administration.

It’s hard to recruit the best teachers under such circumstances, and the profession doesn’t enjoy much prestige. The best and the brightest students survive the system (the army contributes valuable training, too).

The great majority don’t.

Not surprisingly, the Israelis with the weakest skills are Arabs and the ultra-Orthodox. Schools in the Arab sector are the worst in the country, while the Haredim don’t even trouble to teach basic skills at all – at least not boys, who ideally won’t be pursuing higher education or a career. Contrary to the Haredi myth, studying Talmud doesn’t cultivate a mental acuity that might make picking up algebra or fluent English later in life easy.

All of this has painful implications for the Israeli economy, and they will grow more painful as time goes on. Human capital is about the only resource Israel has – and, as it turns out, we don’t have a lot of it and are doing very little to rectify the situation.

A report by the Taub Center for Social Studies released this week correctly asks “Can the Israeli Startup Nation Continue to Grow?” The answer it offers is no, for now at least.

Taking the PIAAC data, researcher Gilad Brand found that the majority (60%) of the elite of Israelis are already employed in high-tech. The skills gap between them and the rest of Israel is huge, so the industry won’t be able to recruit people not already working in tech to solve its labor shortage.

Brand estimates that just 4% of Israel’s working-age population not already employed in tech could potentially join the industry. Among the ultra-Orthodox, the rate is 3% and among Israeli Arabs just 0.5%.

In reality, the pool is even smaller, because a lot of those people are working in high-paid, rewarding jobs and have no incentive to change careers.

Brand acknowledges that the skills of Haredi and Israeli Arabs are improving, but in the short term Startup Nation faces a hard ceiling on the number of engineers it can employ.

There is already evidence that the labor constraint is causing Startup Nation to shrink. Figures from Startup Nation Central show that the number of startups formed in Israel has been shrinking since 2014, when they numbered more than 1,000, to just 700 last year. The number of startups closing every year has nearly doubled, so the net number of new startups has fallen by nearly two-thirds.

Startup Nation Central says the decline reflects the growing maturity of the Israeli tech sector: Entrepreneurs are no longer selling their businesses quickly, but staying in for the long run. Maybe, but more likely the decline reflects the inability to staff a new startup with quality people. There aren’t enough top-flight engineers to go around.

The problem isn’t just Startup Nation’s. If Israel is going to ensure for itself sustainable economic growth and reduce its high levels of poverty and income inequality, it has to become a home for globally competitive non-tech industries, too.

That requires people who might not be able to design a semiconductor, but know how to market a product or manage a logistics center. Right now, we lack those too.

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1.6743253Thu, 13 Dec 2018 03:32:40Ruti LevyThu, 13 Dec 2018 03:32:34Are there almost no Israelis left with the necessary skills to ease the shortage of high-tech workers? Or did researchers who reached that conclusion make assumptions about the capabilities of minorities?

The Taub Center for Social Policy Studies released a report this week that makes the case that there aren’t very many Israelis with the high levels of skills required by the tech industry who aren’t already working in it.

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The report, “Can the Israeli Start-Up Nation Continue to Grow?,” takes aim at a two-year-old government program that calls for spending 900 million shekels ($240 million) on education and training over six years.

The plans aims to boost the number of computer science students at the universities, improve government retraining programs (coding boot camps) and provide guidance and job placement for populations in the under-representation in the sector, namely women, Arabs and ultra-Orthodox

“The statement that emerges from the study is discriminatory and even bigoted against women and minorities, on the grounds that they do not have the necessary skills for high-tech,” Krieger-Carmy said Wednesday, shortly after the report was published.

“We are stunned that a serious researcher in 2018 would claim such a thing,” she added.

Taub researcher Gilad Brand bases his conclusions on the overall skill level of the Israeli workforce as measured by the Survey of Adult Skills (PIAAC). Conducted by the Organization for Economic Cooperation and Development, it measures skill levels in literacy, numeracy and problem-solving among people ages 16 to 65. Fluent English is another criterion.

Israelis fare poorly among the 27 countries surveyed. The share of Israeli workers whose skills are in the lowest decile stood at about 16% of the adult population. Only about 7% of Israeli workers were ranked in the highest skill level, it found.

Among Israeli Arabs, skills are the weakest, with half the population ranking in the two lowest deciles. Of Israeli workers ranked in the highest skills quintile, 22% are already working in the high-tech sector, the highest percentage of all the countries surveyed.

Because the skill levels of Israelis outside the tech sector is so low, the pool of candidates to join the industry is small. Brand estimated that all those aged 25 to 44 in the top third of skills not already working in high-tech amounted to just 4% of the of the working-age population not currently employed in the industry..

Since more than two thirds of that group already works at high-paying, rewarding jobs, most of them are unlikely to switch careers, Brand concluded.

If true, his conclusions have disappointing implications for Israel’s high-tech industry. Employers have complained for years about the shortage of skilled workers and the industry has ceased to be an engine of growth for the wider economy. Only about 8% of Israelis work in tech, a figure that has not increased in years.

If the government’s program failed to expand the labor pool, the industry’s potential will be severely constrained.

“There is little potential for growth in high tech employment in Israel, at least in the short term,” the report concluded. “The study also raises the question of how worthwhile it is to invest in the high tech industry.”

In defense of the government’s program, Krieger-Carmy said many groups in society were severely underrepresented in high-tech, and not because they lacked the basic skills. She noted that women account for only a quarter of tech workers. Israeli Arabs account for 18% of students in higher education but only 3% of the country’s high-tech workforce.

She said the tech labor shortage was due to the fact colleges and universities failed to increase the numbers of graduates with engineering and computer science degrees.

A Taub spokesman denied the accusation of racism, pointing out that the report cited improvement in Arab and Haredi skills. “As for women, there is no doubt that their high skills are exploited in other fields, but the question is why is this not reflected in high-tech,” the center said.

It said high-tech’s culture, not lack of skills, that was deterred women from working in the sector.

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1.6743249Thu, 13 Dec 2018 03:10:30Avi Waksman Thu, 13 Dec 2018 03:10:22Income inequality in Israel is at its lowest level in 20 years, according to figures released on Wednesday by the Central Bureau of Statistics. Nevertheless, inequality here remains among the worst in the developed world.

The CBS said that Israel’s Gini coefficient, a widely used measure of income inequality, had fallen to 0.351 in 2017 from 0.359 the year before. The index measures inequality on a scale of 0 to 1, with 1 being the most unequal.

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The CBS noted that the one-year decline was modest and not statically significant, though the decline that has occurred in the number since 2009, when it was 0.389, is important. Moreover, the Gini index in 2017 was the lowest since the CBS began measuring it in a revised format in 1997.

Since 2010, the measure of inequality has been in steady decline. Yet it still leaves Israel as one of the most economically unequal countries among members of the Organization for Economic Cooperation and Development.

In the years 2013 through 2015, Israel was the most unequal among developed countries, but since 2016 it has been surpassed by the United States. Among other OECD countries with poor records on inequality are Turkey and Chile, with coefficients of 0.35 to 0.4.

Israel’s index is far higher than countries like France (0.290) and Finland (0.260).

The reasons why Israel has seen a decline involve several factors. The government prefers to point to its efforts to coax more Israelis into the workforce, a process that has boosted the labor force participation rate to record levels even as the jobless rate is currently at its lowest in decades.

As Prof. Avi Simhon, Prime Minister Benjamin Netahyahu’s economic adviser, told TheMarker a year ago: “The time has come to get used to the fact that the Israeli economy is in good shape.”

Others prefer to point to government intervention, such as the negative income tax, rises in the minimum wage and the restoration of some government allowances in recent years. In any case, much of the job creation in recent years has been at the bottom of the labor market – jobs that pay relatively little and require little skill or training.

In response, to Simhon’s assertion, the left-leaning Adva Center said in its annual report: “To get used to the fact that the state of the Israeli economy is good means to get used to an economy whose growth is unbalanced, led by a minority and benefitting the minority, which means that a large part of the economy and society in Israel are left behind.”

Israel’s poverty rate is also declining but remains high relative to other OECD countries. Last year the National Insurance Institute said 18.6% of all Israeli families were below the official poverty line of monthly income of 8,345 shekels ($2,225) for a family of four in 2016. Its 2017 data are due out shortly.

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1.6743247Thu, 13 Dec 2018 03:02:55Ora Coren Thu, 13 Dec 2018 03:02:40Israelis face big jumps in their electricity and water bills starting next month. In the case of electricity, it turns out that the bill could be even higher that the Electricity Authority has said it will be.

At the start of the month, the agency said energy rates would be rising a sharp 6% in January, subject to public hearings. That set off a firestorm of protests. But research by Nadav Olgan, a partner at the Tel Aviv law firm of Erdinast, Ben Nathan, Toledano & Co., showed that the authority’s figure was far too modest.

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The authority is adopting a new method for calculating electricity bills, which splits the monthly charge into actual power usage and a fixed fee for the cost of connecting a home or business to the electricity grid.

The new system is designed to ensure that all customers — including households and businesses that are not currently using electricity from the grid, either because the properties are not in use or are using alternative energy sources — are helping to cover the network’s infrastructure costs.

What Olgan found was that between the two components, electricity rates will rise more steeply than the authority originally estimated. However, how much is still subject to dispute.

In a revised estimate released Tuesday, the Electivity Authority said rates would rise by 6.5% to 6.9% for users with single-phase electricity and 8.1% for those using 3-phase electricity.

Olgan, however, said that it still an underestimate. “Because the tariff is being separated into two components (fixed and variable), rates won’t be rising at the 6% rate the authority announced, to 49 agorot (13 cents) per kilowatt-hour, but rather by between 7.5% and 10%,” he said.

On Tuesday, the authority refused to own up to any error. Rather, it said its original announcement referred only to the official rise of the tariff, without taking into account the new formula for calculating it.

The Manufacturers Association of Israel trade group said the rate hike was excessive and that the infrastructure component should be adjusted to make the overall rise more reasonable.

“The business sector is vehemently opposed to the rate rise and is demanding that the authority raise the rate is a responsible and measured way, It needs to spread out the planned increase in power rates over several years,” said the president of the organization, Shraga Brosh.

As if all that were not enough, on Wednesday the Water Authority said that water rates would go up 4.56% from January. That was higher than the 3.25% increase the authority had originally estimated would be imposed.

The increase is due to the fact that Israel is buying an additional 70 million cubic meters of costly desalinated water, the consequence of a five-year drought Israel has experienced. In addition, the authority said, the water and sewage system needs to expanded population growth and a surfeit of new housing projects.

The water hike quickly elicited a protest from the Federation of Israeli Chambers of Commerce, which estimated its members would be paying an extra 81 million shekels in water costs annually.

“Slowly its becoming clear that higher prices for consumer goods and the rising cost of living isn’t the fault of the business sector but the inability of the government to fight price increases originating in state-owned monopolies,” said the organization’s president, Uriel Lynn.

In fact, business have been raising prices for four months. Food manufacturer Osem announced Tuesday that it would raise prices for about a third of its products by 2% to 4.5% at the start of next year. That incluees popular products such as the Bamba peanut snack, ketchup and powdered soups.

Tnuva, Israel’s biggest maker of dairy products, said it would raise prices for the first time since the social-justice protests of 2011. Citing a rise in the cost of raw milk, the company said prices for many of its products not subject to price controls would rise an average of 2.2%. Other dairy manufacturers have followed suit.

OrCam, a Jerusalem startup whose wearable cameras help the visually impaired, launched a crowdfunding drive Wednesday for its newest product. Called MyMe, the wearable camera uses artificial intelligence to identify people the user encounters. “It’s a companion, a second brain, a third eye, notifying you of the names of the people you’re supposed to know. Make sure you’re spending the right amounts of time with each of your circles, set goals for yourself,” the company explained to potential contributors on the crowdfunding site Kickstarter. People who pledge $199 (half the suggested retail price for the device) will get delivery of the camera in March. Unlike most startup crowdfunding campaigns, OrCam isn’t seeking to raise the capital to manufacture the device, but to create a community of early adopters. Founded by Amnon Shashua and Ziv Aviram, who also started the automotive technology company Mobileye, which was sold to Intel for $15 billion, OrCam has raised $130 million. (Irad Atzmon Schmayer)

BiomX, an Israeli startup developing phage therapies, that target and destroy bacteria in chronic diseases such as inflammatory bowel disease and cancer, said Wednesday it was entering into a partnership with a unit of Johnson & Johnson. The J&J unit Janssen Research & Development will use BiomX’s XMarker microbiome-based biomarker discovery platform in connection with IBD. The collaboration comes in response to growing evidence that the composition of the microbiome can be a predictive tool for disease and patient response to therapy for IBD, cancer and liver disease. “Beyond target discovery, we believe that our microbiome analytics holds great promise for the development of a new class of biomarkers in major disease areas such as liver disease, cancer and IBD, said BiomX CEO Jonathan Solomon. A group of disorders that involve chronic inflammation of the digestive tract, IBD affects as many as 1.6 million Americans. IBD can be debilitating and sometimes leads to life-threatening complications. (Yoram Gabison)

PayPal Israel employees to get six Sundays off every year

The high-tech industry is famous for its long work hours, but employees at the Israeli offices of online payments company PayPal will be putting in fewer hours from now on, by getting six Sundays off every year. “The idea came from employees and was supported enthusiastically by management,” PayPal Israel CEO Peretz Regev told TheMarker. “As employers we want our employees to cope in the world of high-tech, because it’s not a world of working from 9 to 5.” He noted that staff not only worked long hours but had to adjust their schedules to the multinational company’s various time zones. PayPal employees in North America and Europe have Sundays off, of course. “It was important for us to know how we could give employees, under the circumstances, more quality personal time,” he said. The PayPal plan echoes a proposal by Economy and Industry Minister Eli Cohen to give all Israelis between four and six Sundays off every year. The legislation, however, has stalled. (Iran Atzmon Schmayer)

Optibus raises $40m for mass transit tech

The U.S.-Israeli startup Optibus, whose software is designed to modernize mass transit systems and prepare them for smart-city integration, said Wednesday it raised $40 million in a funding round led by Insight Venture Partners of the U.S., with a strategic investment from China’s Alibaba Group. Existing investors, including Verizon Ventures, Pitango Venture Capital, New Era Capital and Sir Ronald Cohen, also participated. Details of Alibaba’s stake were not disclosed.. The company said its technology is being used by more than 300 cities to improve quality of service, reduce costs, streamline operations and reduce congestion and emissions. Since its establishment, four years ago, the company has raised $54 million, including $12 million in 2017. Optibus has expanded its presence in North America and Europe and seen its sales grow by 400%, it said. With the new funding, Optibus said it planned to add 55 new employees to its current payroll of 75. (Iran Atzmon Schmayer)

Israel Electric Corporation is expected to receive 400 million shekels ($107 million) in a settlement arising from a lawsuit filed by the state-owned utility against Siemens, Alstom and ABB. The payment, which is subject to the approval of all the parties, would end IEC’s claim that the three European companies operated a cartel that coordinated prices and prevented competitive bidding in Europe and Israel. The allegations were based on a 2007 European Commission finding that resulted in a 750.7 million euro ($803 million) fine. Israel’s Antitrust Authority concluded that the cartel operated in Israel as well but IEC had trouble proving that claim and its claim that the cartel caused 3 billion shekels in damages, as the suit argued. The three companies rejected the allegations and said any damage the cartel caused were minor. In the past IEC has said that any damages it collects will be passed on to customers. (Ora Coren)

Ben-Moshe seeking another delay in completing Africa Israel deal

Moti Ben-Moshe is seeking again to delay completion of his acquisition of Africa Israel Investments even though he has effectively taken over management of the holding company, TheMarker has learned. The deadline to close the deal was set for Thursday, but Ben-Moshe told Africa Israel bondholders he had yet to receive antitrust clearance from several European countries, including Romania. Under the terms of the bailout agreement, Ben-Moshe is supposed to transfer 1.5 billion shekels ($400 million) in cash to bondholders, but to date he has succeeded in raising just 280 million in the market. One source, however, said he was confident Ben-Moshe would raise the capital. “Ben-Moshe is playing poker with the capital market over interest rates. It’s clear that he will close a deal but he is arguing with institutions over the interest rate,” he said. Bondholders will vote Thursday on whether to grant an extension and whether to impose penalties for the delay. (Shelly Appelberg)

Tel Aviv shares end mixed in choppy trading

Tel Aviv shares ended mixed after a day of choppy trading. The benchmark TA-35 index finished the session up 0.25% at 1,594.73 points, while the TA-125 ended down 0.2% to close at 1,440.03, on turnover of 1.14 billion shekels ($300 million). Gains for blue chips were led by Teva Pharmaceuticals, which closed 3.1% higher at 71.63 shekels. Delek Group rose 2.7% to 675 and B Communications by 2.1% to 30.25. Its Bezeq subsidiary, however, finished unchanged at 4. Alony Hetz rose 0.7% to 35.90 after it sold 365 million shekels of shares in Switzerland’s PSP over the past weeks, reducing its stake to 10%. Pointer Telocation gained 1.4% to 44.30. It announced a joint venture with Pricol to provide advanced telematics and “internet of things” solutions in India and other Southeast Asian countries. Paper Mills fell 0.25% to 278.90. The company said it expects a 50 million shekel gain after reaching an agreement with tax authorities for the years 2014-16. (Jasmin Gueta)

The dollar reached its highest against the shekel in nearly two years Tuesday, but dealers said the Israeli currency should reserve course next year. The dollar strengthened more than 0.5% Tuesday to a representative rate of 3.751, marking a gain of 10% since the end of January. The euro recovered, advancing nearly 0.3% to 4.272 shekels. The dollar has been gaining against nearly all global currencies in the past year as the U.S. Federal Reserve raises interest rates at a far faster pace than other central banks, including the Bank of Israel. “It’s not a local story about the shekel,” said Lior Faust, head of the foreign currency desk at Leumi Capital Markets. That said, the shekel has gained against most other currencies. Faust said the shekel will rebound over the course of next year because the pace of Fed rate hikes is slowing and concerns about political stability in Israel and slower economic growth should ease. (Guy Erez)

Teva shareholders demand company sue U.S. employees over role in alleged cartel

A group of Teva Pharmaceuticals Industries shareholders are demanding that the company file lawsuits against employees and executives of its U.S. subsidiary over their role in an alleged generic-drug cartel. The investigation began in 2014 with a probe into the suspected price-fixing of two drugs, but on Sunday The Washington Post reported that its scope had expanded to at least 16 companies, including Teva, and 300 drugs. The price-fixing was coordinated by executives of the companies over steak dinners, cocktail parties and rounds of golf, prosecutors say. In a letter to Teva Chairman Sol Barer, lawyers for the shareholders cited Section 194 of Israel’s Companies Law, according to which if the company fails to take legal action against the suspect employees, shareholders can sue Teva USA. They claim the cartel will cost Teva hundreds of millions in legal costs alone. Teva shares ended up 0.6% at 69.49 shekels ($18.52). (Yoram Gabison)

Entera shares soar on drug-development agreement with Amgen

Shares of Entera Bio soared Tuesday after it said it had reached an agreement with the U.S. drug giant Amgen. Under the agreement, Entera will use its proprietary drug-delivery platform to develop oral formulations to treat inflammatory disease and other serious illnesses. Amgen has selected one preclinical large-molecule program and has an option to select up to two additional programs to include in the collaboration, Entera said. Entera will receive a “modest” initial technology access fee from Amgen, which will also pay for preclinical development. In addition, Entera will be eligible for up to $270 million in aggregate payments, as well as tiered royalties up to mid-single digits, tied to clinical and commercial milestones if Amgen decides to move all of these programs forward. Entera said it would retain all intellectual property rights to its drug delivery technology. Entera shares were up 4.2% at $5.20 at late morning local time in New York. (Yoram Gabison)

Whitestone bonds soar after U.S. property company receives offer to buy assets

Bonds of B.H. Whitestone soared 10% Tuesday after the U.S. property company said it had received an offer to buy all of its assets as well as assets of a sister company. Whitestone bonds, like those of many other of the 35 U.S. real estate companies listed on the Tel Aviv Stock Exchange, have fallen sharply, leaving yields at junk levels. Tuesday’s announcement contained few details, including the name of the buyer or how much it was prepared to pay for the assets. Whitestone said it expected the valuation would be higher than what appears in the company’s books. “At this stage the company and its controlling shareholders are examining the offer and engaging in talks on a deal and its terms,” Whitestone said. “In addition, the company and its controlling shareholders haven’t been able to verify the financial ability of the proposed buyers,” it said. Whitestone has issued 400 million shekels ($107 million) in bonds on the TASE. (Eran Azran)

Tel Aviv shares snapped three sessions of losses Tuesday as U.S. stocks jumped on signs of progress between China and the United States to resolve their trade dispute. The TA-35 and TA-125 indexes both finished ahead 0.7% at 1,590.70 and 1,440.25 points, respectively, on turnover of 1.35 billion shekels ($360 million). Blue chip gains were led by a 6.3% rise to 29.62 shekels for B Communications, although its Bezeq subsidiary only posted an 0.4% rise to 4. Opko Health rose 4.7% to 12.83, Perrigo advanced 4.2% to 227.20 and Partner Communications added 3.45% to 20.08. Banking shares were lower: Leumi dropped 1.15% to 23.17, Israel Discount 1.1% to 12.56 and Hapoalim 0.9% to 24.22. Redhill rose 2.1% to close at 2.68 after it announced the completion of the public offering of its American Depositary Shares at $7.00 each, or a total of $20 million. The Tel-Bond Global index rose 0.83% to 332.45. (Guy Erez)

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1.6740850Tue, 11 Dec 2018 20:46:59TheMarkerTue, 11 Dec 2018 19:38:47Already the epicenter of the Israeli-Arab high-tech scene, Nazareth is now getting its first share workplace. This week the multinational company Regus opened a 1,000-square-meter, 50-million-shekel ($13 million) center on Paul VI Street in the city’s downtown. About 30% of the space will be occupied by an unnamed software-services and digital-advertising company, and the rest by smaller businesses and outposts of bigger tech companies, Regus said. “Nazareth has a big population of developers who today travel very far to get to work. A lot of employers are seeking a local solution,” said Ofer Witkon, CEO of Regus Israel. “There are few companies that want to be here completely and move all their operations to Nazareth, but not a few companies are looking to provide a solution for their staff.” The center, which opens in January, will include 50 private offices of different sizes, 158 standalone desks, shared space and meeting rooms. (Gili Melnitcki)

WhiteSwell raises $30 million for heart-failure treatment

WhiteSwell, an Israeli-Irish startup developing ways to treat a form of heart failure, said Tuesday it had secured $30 million from investors led by RA Capital Management and an InCube Ventures syndicate. The form of heart failure – acute decompensated heart failure – causes breathing problems, fatigue and edema due to fluid backup in the lungs and results in millions of hospitalizations worldwide each year. Instead of focusing on removing excess fluid from the vascular system, WhiteSwell’s technology removes excess fluid in the interstitial system, the fluid-filled spaces in connective tissue that are outside the vascular system. The $30 million will be used for product development and a pivotal study of the company’s technology, WhiteSwell said. In addition, founder and Chief Technology Officer Yaacov Nitzan will be joined by CEO Eamon Brady and Chief Financial Officer Seán Mac Réamoinn, who served in the same roles at Neuravi, a stroke-treatment company acquired by Johnson & Johnson last year. (TheMarker Staff)

Quali nabs $22.5 million for software-development automation

Quali, whose platform automates software development, said Tuesday it had raised $22.5 million from a group led by Jerusalem Venture Partners. The company’s existing investors, including Dell Ventures, Kreos Capital, Evergreen Ventures, Gemini Israel Ventures and ORR Partners, joined in the round. “Our challenge now is to evolve into a global scale. Today we sell both directly and through partners. We plan to increase this activity. For this purpose, we plan to recruit 20 new employees in sales, customer service and development positions,” said CEO Lior Koriat. Quali now employs about 100 people, 65 of whom work at the company’s offices in Ganei Tikva, Israel, and the rest in California. Quali said that over the past two years it has seen 50% annual growth in recurring revenue and has expanded into the enterprise segment, where its 200 customers include Bank of America, Wells Fargo and IBM. (Irad Atzmon Schmayer)

TechSee secures $16 million for its AI-based customer-service platform

TechSee, whose artificial-intelligence-based video service uses computer vision, augmented reality and a customer’s own smartphone camera to provide tech support, said it had raised $16 million. The round was led by Scale Venture Partners, with participation of existing investors including Planven Investments, OurCrowd, Comdata Group and Salesforce Ventures. “While technology has become a commodity, customer service is still labor intensive and often involves friction-filled interactions. This results in high cost of service and barriers to customer adoption, negatively impacting enterprise profitability and scalability,” said CEO and cofounder Eitan Cohen. TechSee’s technology lets consumers enjoy augmented-reality-based visual guidance; for example through their smartphones or a virtual technical assistant. The company says that more than 15,000 customer-care representatives at companies like Vodafone, Samsung, Orange, Hitachi and Accenture use its technology. Founded in 2015, TechSee has raised $23 million to date. Its headquarters are in Tel Aviv with offices in New York and Madrid. (Irad Atzmon Schmayer)

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1.6740682Tue, 11 Dec 2018 19:04:37ReutersTue, 11 Dec 2018 17:50:41Israel will likely allow exports of medical cannabis by the end of the year, Likud MK Yoav Kish announced on Thursday. The move that would boost state coffers and slow the growing number of Israeli firms establishing farms abroad.

Benefiting from a favorable climate and expertise in medical and agricultural technologies, local companies are among the world’s biggest producers of medical cannabis.

The finance and health ministries estimate exports could bring in about $1 billion a year, but Public Security Minister Gilad Erdan and some lawmakers are opposed to Israeli-grown cannabis going abroad, fearing more cultivation could push more drugs onto the streets at home.

The government had sought to approve the exports, but efforts stalled last April after Erdan and other ministers raised objections and sought more money for monitoring growers of the substance.

>> Read more: What is an Israeli cannabis company doing in Uganda? The answer is hazy ■ He grew weed with his mom. Now ge’s worth $500 million ■ Finance minister lambastes delay in approving medical marijuana exports

Kish, chairman of the Knesset Interior and Environment Committee, has since submitted a bill to allow exports that imposed tougher regulations on exporters and threatened jail terms and hefty fines for violations. His proposal passed its first of three votes in the plenum last week, and is back with Kish’s committee for revisions.

“I aim to finish the legislation by the end of the year,” says Kish, who estimates that the law could boost tax income by 1 billion shekels ($268 million) a year. “We believe it’s medicine and it’s important ... It’s a big potential for Israeli farmers and the economy.”

There are currently eight local cultivating companies, a number of whom have resorted to opening farms abroad to get into the international market. The government says there have been many requests from business owners awaiting authorization.

Cannbit, a newcomer that has established a farm in southern Israel – and signed a deal this week with local medical cannabis supplier Tikun Olam – said it was looking into opening a farm in Portugal if the new regulations do not go through.

“If there will be exports from Israel there will be less tendency for investments in other places,” said CEO Yaron Razon.

Together, another Israeli cannabis grower, has already set up farms in Europe after signing a $300-million contract to supply cannabis products to a Canadian company.

“Exporting from Israel can have a big impact on the industry and economy,” said Alex Rabinovitch, controlling shareholder of InterCure, which recently bought medical cannabis firm Canndoc.

Spacecom, the company that owns and operates a fleet of Amos satellites, was controlled by the telecommunications tycoon Shaul Elovitch. But as police and Israel Securities Authority probes mounted against him and his debt piled up, Elovitch lost his empire, including Spacecom, to his bank creditors.

The absence of a controlling shareholder couldn’t have come at a worse time for Spacecom, which is struggling with debt of some $520 million as well as the failure to reach an agreement on building a new satellite to service customers.

Spacecom’s problems have caused its shares to sink on the Tel Aviv Stock Exchange more than 23% in the past month, including an 8.4% drop on Monday to 9.93 shekels ($2.65) a share. Its market cap is now just 207 million shekels, compared with 890 million two years ago.

There have been no business developments at Spacecom to justify the decline; rather, investors don’t see how the company can’t repay its debt with the tiny profits it is generating, nor do they see how its reaching an agreement to build its next satellite.

Spacecom has had its share of bad luck in the past, including the loss of contact with its Amos 5 satellite while in orbit in 2015 and an explosion that destroyed its Amos 6 the following year while it was on a Launchpad.

The company reached an agreement last March for the U.S. company Space Systems/Loral to build the Amos 8 for $112 million, but in September Spacecom was forced to back out of the deal under heavy pressure from Israel Aerospace Industries. IAI can build satellites but not as quickly or cheaply as Loral.

IAI had lost out to Loral because it couldn’t match the American company’s prices for its end-2020 delivery date. But state-owned IAI and union leaders exerted heavy pressure on the government, which in turn threatened not to sign agreements to use Amos 8 services.

As Yair Katz, chairman of the IAI workers committee and the son of Labor Minister Haim Katz said: “If [the decision makers] disappoint us, you can assume that they won’t continue enjoying the confidence of the workers in the Likud Party primaries.”

Without the Israeli government as a customer, Amos 8 wasn’t financially viable, leaving Spacecom no choice but to cancel its agreement with Loral and SpaceX to launch the satellite.

Since then, however, no agreement has been reached with IAI either; indeed, Spacecom has never said on the record it had any agreement at all with the company. Spacecom has refused to pay more than the $112 million Loral had agreed to and so far the Israeli government hasn’t committed to covering the difference.

The waiting game and doubts about its outcome have caused stock market investors to give up hope on Spacecom.

Beyond the company’s problems the delays have raised doubts about Israel’s ability to remain a player in the global satellite communications sector.

In a report released two months ago, the government’s State Comptroller recounted a decade of wrongheaded planning and policy. That has “seriously jeopardized the country’s capabilities in the field and the technological and human infrastructure that has been built over the decades.”

The only good news regarding Spacecom is Amos 17, the $161 million satellite the company contracting with Boeing to build to replace the ill-fated Amos 5. Due to be launched in second-quarter 2019, it already has $30 million worth of contractual commitments from users.

The long-waited privatization of Israel Aerospace Industries is moving ahead after Benjamin Netanyahu, in his role as defense minister, quietly gave the go-ahead in the last several days. The plans had been opposed by Netanyahu’s predecessor at the post, Avigdor Lieberman, over concerns that going public would inevitably lead to classified national security information leaking out.

Under the plan, a stake of between 25% and 30% of IAI will be floated on the Tel Aviv Stock Exchange. The higher figure would give the stock a place in the TASE’s TA-35 index on blue chip; over 25% would entitle it to inclusion in the broader TA-125.

IAI estimates its value at $4 billion, but the company posted a $19 million third-quarter loss and has been struggling in recent years with sluggish revenue growth. In any case, the state-owned arms maker will be required to get an independent valuation before it can go ahead with the IPO. (Hagai Amit)

Bank of Israel monetary panel voted 4-1 for first rate hike in seven years

The Bank of Israel’s monetary committee wasn’t unanimous when it decided November 26to raise interest rates for the first time since 2011. Minutes from the meeting released on Monday showed members voted 4-1 to raise rate to 0.25% from 0.1%.

The rate hike was unusual not only because it was the first in seven years but because it was done after Karnit Flug had stepped down as governor and Amir Yaron had not yet taken over. However, the minutes showed that the committee concluded that Israel’s macro environment required immediate action.

“They assessed that the economic considerations are the decisive factors in reaching the interest rate decision, and not the fact that the Bank is in a period of transition between governors,” the minutes said. The one member who opposed the hike countered that the situation was “borderline” and felt that the move should be led by the new governor, the minutes showed. (Avi Waksman)

Regulators conclude that Elsztain is no longer controlling shareholder of Super-Sol

The Israel Securities Authority has concluded that the Argentinian real estate magnate Eduardo Elsztain no longer controls the supermarket chain Super-Sol through his Discount Investment Corporation.

Elsztain’s holding company had reduced its stake in Super-Sol in the second quarter from 50.2%to 33.6% and reported a 1.28 billion shekel ($340 million) capital gain from the sale – money it needed to repay debt but could only add to its balance sheet if indeed it was no longer a controlling shareholder.

However, a boardroom battle last June that led to the exit of Super-Sol Chairman Israel Berman had raised questions about whether Elsztain still effectively remained in control. In reaching its conclusion, the ISA noted that Discount had reduced its stake further to 26% last month and that the institutional investors who had bought its shares now had two seats on Super-Sol’s board. The decision clears the way for the approval of a shelf prospectus Super-Sol has sought. (Yoram Gabison)

The Tel Aviv Stock Exchange joined a decline in global stocks on Monday as fresh signs emerged that the U.S.-China trade spat was taking a deeper toll on world economic growth.

The TA-35 and TA-125 indices both finished the day down more than 0.7% at 1,579.97 and 1,430.49 points, respectively, on turnover of 1.26 billion shekels ($340 million). Insurance stocks were sharply lower, with Clal losing 3.7% to 59.90 shekels, Phoenix down 2.8% to 21.24 and Migdal down 2.7% to 4. Mivtah Shamir fell 0.8% to 66.88.

The holding company said it would invest in a $450 million natural gas-fired power plant being developed by Kesem Energy. Tamar Petroleum ended 0.2% lower at 16.32.

A suit filed Monday claims the company’s decision of raise royalties paid to Delek Energy was improper. Cellcom Israel said Monday it had raised 384 million shekels in debentures – 187 million at 3.7% and 213 million at 4.34%. (Michael Rochvarger)

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1.6728814Mon, 10 Dec 2018 20:05:49Yoram GabisonMon, 10 Dec 2018 16:22:38Teva Pharmaceutical Industries, the Israeli company that is the world's largest generic drug firm, is suspected of being part of one of the biggest cartels in the history of the United States, according to a report on Sunday by the Washington Post.

Teva is one of more than a dozen generic drug companies under investigation for price fixing and dividing up the market share for 300 generic drugs, the Washington Post said. It cited comments made to the newspaper by Joseph Nielsen, an assistant attorney general and antitrust investigator for the state of Connecticut.

The coordination was allegedly conducted using emails and text and WhatsApp messages — and at steak dinners, cocktail receptions and golf games involving senior executives from the pharmaceutical companies.

The investigation was launched in 2016 when antitrust investigators in dozens of states examined suspected price-fixing of just two drugs, but the investigation expanded rapidly and now includes 47 states. The prices of many generic drugs, including older ones, began to soar in 2013 and 2014, sometimes by thousands of percent. One of the most extreme examples cited by the Post was that of a long-standing asthma drug, albuterol, the price of which jumped by over 3,400%.

The drug is sold by Mylan and Indian generic firm Sun. Mylan, and its president, Rajiv Malik, are said to be major suspects in the case. Malik is reportedly suspected of personal involvement in price-fixing. Shares of Mylan were dual-listed on the Tel Aviv Stock Exchange from 2015 until February of this year.

Apparently, two senior executives from one of the firms, Heritage, who pleaded guilty to price fixing in a separate case, have turned state’s evidence. Prosecutors appear to be hoping that many of the companies will reach plea agreements and pay huge fines. According to the Post, among the 16 companies accused are some of the biggest names in generic drugs, including Mylan, Teva, Sun and Dr. Reddy’s.

Mylan denied the charges. Teva, Sun and Dr. Reddy’s did not respond to the Post's requests for comment. In a court filing, Teva said allegations of a price-fixing conspiracy “are entirely conclusory and devoid of any facts.”

All companies listed on the Tel Aviv Stock Exchange should be allowed to report in English to help them attract more international investment, Israel’s market regulator proposed on Sunday. Most companies in Tel Aviv must currently report in Hebrew, with the exception of high-tech and dual-listed firms that are permitted to use English. The new proposal offers the option to all businesses and is meant to bring Tel Aviv in line with leading global exchanges. “Giving the option to report in English is expected to remove the language barrier and further open the Israeli market to the world,” said Anat Guetta, chair of the Israel Securities Authority. If it is accepted and the law is amended, companies making an initial public offering in Tel Aviv could choose English, while those already listed would need board and shareholder approval to switch languages. The public has until January 16 to respond to the proposal. (Reuters)

Teva’s generic EpiPen to face lower-priced rival product from Sandoz

Novartis’ Sandoz unit will launch an emergency allergy-shot product next year in the United States at a price about 16% less than generic versions of the best-selling EpiPen, including one just sold by Israel’s Teva Pharmaceuticals. Sandoz will start selling the pre-filled epinephrine syringes, called SYMJEPI, in the first quarter of 2019 at a wholesale price of $250 for a two-pack of 0.3-milligram injections, Novartis said. The news comes a month after Teva launched a generic version of EpiPen at the wholesale price of $300 for a pack of two auto-injectors – the same price as Mylan’s generic version of its own product. Two years ago, Mylan’s EpiPen sales practices sparked public outrage in the U.S. as consumers saw the price rise six-fold to $600 in less than a decade. Mylan launched its generic version at half that list price in 2016. Teva shares ended down 1.75% at 73 shekels ($19.56). (Yoram Gabison)

Tel Aviv shares decline Tel Aviv shares ended lower, but off their bottoms for the day, in light trading

The benchmark TA-35 index ended down 0.3% at 1,591.71 points, while the TA-125 lost more than 0.2% to 1,440.86, on turnover of just 466 million shekels ($124.9 million). Among the biggest blue chip declines, Perrigo tumbled 5.2% to end at 224.50 shekels and Nice lost 2% to 419.40. Summit led TA-125 gainers, climbing 2.8% to 33.78, with Isramco trailing on a 2.4% gain to 43 agorot. Israel Chemicals advanced 1.2% to 21.40. Afcon rose 1.9% to 195.70 and Minrav Holdings 1.6% to 378.70 after the two companies said they won a 262 million contract to build a new blood bank for Magen David Adom. In the bond market, prices for U.S. real estate companies continued to be pressured lower, paced by a 4.6% drop in Starwood West and a 3.1% decline for All Year. The Tel-Bond Global index, which represents the sector, lost another 0.6%. (TheMarker Staff)

A unique partnership between a government institution and a private sector venture capital fund is underway. The government’s Sheba (Tel Hashomer) Medical Center is raising $45 million for a VC fund together with the Israeli fund Triventures to invest in medical startups. Called TVARC, the fund will focus on startups founded by Sheba doctors and intellectual property created at the medical center as well as startups in fields related to the new fund’s targets. “It will enable us to invest in young people with good ideas,” said Prof. Yitzhak Kreiss, Sheba’s director general. “Until now, when a young doctor came to me with a good idea, even one that could change the face of world medicine, I could give him 40,000 shekels [$10,700], a laughable sum. I didn’t have any resources beyond that.” Sheba will not invest any money in the fund, but it will be entitled to 20% of any future profits from portfolio companies. (Ronny Linder-Gantz)

FinTLV investing in insurance startups while advising insurers on innovation

FinTLV, a new Israeli venture capital fund specializing in insurance-tech, not only will be investing in startups but also will be advising old-line insurers how to adopt innovative technology. “We have a network of insurers and re-insurers from all over the world,” said Gilbert Ohana, a co-founder and general partner who hails from the army’s revered 8200 military intelligence unit. “We brainstorm them because they don’t always know what their needs are. We discuss general trends and specific needs and present solutions. And that led us to launch a fund focused on insure-tech.” The fund has raised $30 million from investors that include the accounting firm BDO, Clal Insurance and an unnamed Asian insurer. It has already invested in three startups and plans to build a portfolio of 10-15, both early-stage companies and older ones that are undertaking a change of direction, said Ohana. It will invest between $1 million and $3 million in each of them. "We are looking into about 3,500 companies worldwide, searching for ripe technologies that we can build upon for the insurance world," said Gil Arazi, co-founder and managing partner. (Amitai Ziv)

Israeli drone maker gets wide clearance from U.S. regulators

Airobotics, an Israeli company whose automated-drone technology is used in manufacturing and mining, said it received unusually wide approval from U.S. regulators to operate unmanned aerial vehicles. The certificate of waiver awarded by the Federal Aviation Administration combines three elements, including permission to fly automated drones Beyond Visual Line of Sight (BVLOS) and to fly them over people. “This latest certification opens the gateways to offering American mining companies, seaports, major construction projects, and in the future smart cities, an optimal means of increasing efficiency and safety while decreasing operational costs,” said CEO and co-founder Ran Krauss. The waiver applies to Airobotics new Remote Operations Center in Scottsdale, Arizona, which has become the company’s headquarters as well. The company recently completed a $30 million round of funding that brings the total it has raised to date to $101 million. The new funding will be used to further scale operations in the United States, Airobotics said. (TheMarker Staff)

Sirin Labs has just 6-12 months’ worth of cash, CEO tells Bloomberg

Just a week-and-a-half after a festive launching of his blockchain-based smartphone Finney, Moshe Hogeg told Bloomberg News that his Sirin Labs only has enough funds for six to 12 months of operations. The company, which is due to ship the first batch of a few thousand smartphones this month, is now considering abandoning hardware altogether and refocusing on shipping software for other phone makers to use, Hogeg was quoted as saying in an article on how the plunging value of crypto-currencies is taking a toll on crypto-financed startups. Hogeg clarified to TheMarker that Sirin was still committed to its hardware program and would only take the software route if it fails to sell enough of the new smartphones. “We are pleased to say that orders have already exceeded 100,000,” he added. Sirin raised $158 million last year in an initial coin offering to create a mobile phone that allows cusers to trade and use crypto. (Sagi Cohen)

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1.6727503Mon, 10 Dec 2018 08:37:36Yael Darel Mon, 10 Dec 2018 07:03:22Less than a month after it launched a new service for short-term apartment rentals via Airbnb, Israel’s Fattal Hotels is making another foray into the shared economy, this time with shared office space.

TheMarker has learned that Fattal has rented two floors in the Amot Insurance complex in Tel Aviv that it will convert into shared office space on the WeWork model. The new, 5 million shekel ($1.3 million) facility will begin operations next April.

Fattal is entering a crowded market. Although there are no exact figures on the number of shared workspace facilities in Israel, industry figures estimate they number 80 just in the Gush Dan (greater Tel Aviv area).

>> Meet ToHA: The most talked about new building in Israel

In the last year alone facilities have been launched by Labs, which is controlled by the Israeli entrepreneur Teddy Sagi, and European-based Rent24, which said it also planned to expand into shared living spaces. We Work, which pioneered the concept, recently expanded its offerings with a four-floor site at the ToHA site in Tel Aviv.

A key part of the company’s strategy is to locate its shared-office facilities near its hotels so that office tenants can make use of hotel services, including meals, spa and bar services and conference facilities, said Ron Yariv, who is heading up the new Fattal operations.

“That way companies can enjoy many additional services beyond the office services and community networks offered in other work spaces,” Yariv said. “At the same time, hotel guests can make use of our office services and network with other business people renting space in our facility.”

Fattal’s first shared workspace will be located next to one of its NYX boutique hotels, which has been operating from the Amot complex since 2014. The company signed a 20-year lease on the space at 1.65 million shekels annually.

Shares of Fattal Holdings, which went public on the Tel Aviv Stock Exchange last February, ended 0.1% higher at 445.30 shekels on Sunday.

Fattal, which operates 186 hotels in Israel and 18 European countries, has been offering short-term apartments via Airbnb and other booking sites under the “Master” brand of its Leonardo Hotels chain. Master offers apartments in two buildings in the trendy Tel Aviv neighborhoods of Kerem Hateimanim and Neve Tzedek.

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1.6727491Mon, 10 Dec 2018 06:25:18Rina Rozenberg KandelMon, 10 Dec 2018 06:15:10Nava and her husband returned two weekends ago from a three-night trip to Barcelona. They aren’t wealthy, but it was their fifth trip of the year. They have travelled so frequently that they can’t recall how many overseas vacations they have taken in the last few years.

“If I find a ticket for Barcelona for $200, why shouldn’t I buy it?” she says.

The couple are typical of the new breed of travelling Israelis, who have taken advantage of the revolution in airfares since 2013 wrought by the Open Skies aviation agreement with the European Union. Open Skies brought down airfares by allowing new carriers and new destinations to service Israel.

This year alone, some 8.5 million outbound flights will be recorded out of Ben-Gurion International Airport, a 12% increase over 2017. All told, the airport will handle 23 million passengers this year and expects to handle 25 million in 2019.

A recent report by the Israel Airports Authority forecasts a 14% increase in the number of flights into and out of Israel this winter season to an average 1,198 a week. The number has jumped 57% since the 2014-15 season.

Foreign carriers are enjoying the biggest growth, with low-cost carriers leading the way. EasyJet, for instance, will be flying 70 weekly flights, up from 53 this year. Israeli airlines, led by El Al, are increasing their flights by just 6% year on year. As a result, their share of total flights serving Ben-Gurion is due to drop to 27% this winter, down from 29% a year earlier and 33% two years ago.

The big question is when the new Ramon Airport servicing domestic and international flights to the southern resort town of Eilat will open. The IAA declines to commit itself to a date, although it is widely expected to be sometime during this winter season.

Right now, 5% of all international flights to and from Israel go through the existing Uvda Airport near Eilat.

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1.6724060Fri, 7 Dec 2018 06:03:40Efrat NeumanFri, 7 Dec 2018 05:42:12As of January, regulations limiting the use of cash and tradable checks will take effect, in an effort by the government to combat money laundering, tax evasion and terror funding.

What does the Tax Authority’s new measures have in store for rank-and-file consumers? Let’s find out.

What are the limits on cash payments?

Transactions of less than 11,000 shekels (nearly $3,000) are unaffected. Transactions with a business for more than 11,000 shekels can be paid up to 10% in cash, up to a cap of 11,000 shekels, whichever is lower. For private citizens the law limits transactions to 50,000 shekels in cash, after which up to 10% may be paid in cash, or 50,000 shekels, whichever is lower.

Do the limits affect tourists?

Tourists may not pay for purchases of more than 55,000 shekels in cash. Tourists also are not permitted to use more than 11,000 shekels in cash to receive or pay a salary, a donation, or a loan. Tourists may not give or receive gifts of more than 50,000 shekels in cash.

How about gifts within the family?

Gifts may not total more than 50,000 shekels in cash, but these limits do not apply within the family. The definition of family is broad, and includes a partner, parent, grandparent, child, sibling and nieces and nephews. This family exception does not apply to salaries.

What’s considered a transaction by law?

The sale of an asset or a service. The price is the total, even if it is divided up into payments, and including taxes and any accompanying expenditures.

And if part of the transaction is paid in cash and part in credit, what’s the price?

The price is still considered the total paid.

And if I buy matching sofas, a table and a bookshelf for a total of 20,000 shekels, is the transaction total what matters, or the price for each individual item?

In this case, the total only matters if the deal was carried out as one unit – if the buyer is given a special offer for this specific collection of items.

If I buy a living room set as a unit but request a price quote for each item on its own, that’s not considered a single transaction?

The wording of the regulation is unclear, but if all the items are purchased at the same time, such an action could be considered a false division. The Tax Authority has stated that falsely dividing up a transaction into payments or by other means in order to get around the restriction is considered fraud, which has a penalty of jail time.

For an ongoing service contract, such as a retainer paid to a law firm, what’s the price?

In this case, every periodic payment – such as monthly fees – is considered a transaction.

And regarding a lawyer hired to handle a specific suit or acquisition over a certain period of time, and the payment is carried out in several parts?

In such a case, the price is the total paid for the service, even if the payment is divided up.

What are the sanctions on a company that receives cash in violation of the law?

The fine is based on the total violation (cash received). For violations of up to 25,000 shekels, the fine is 15% of the total; for violations of 25,000-50,000 shekels, the fine is 20%; and for violations of more than 50,000 shekels, the fine is 30%. The violation is calculated after subtracting the sum that would have been permissible to receive in cash.

What does the law hold for an individual who pays in cash in violation of the law?

Private individuals pay a fine.

What about legal and accounting services?

Lawyers and accountants receive money for two kinds of services – one for their work, and one to be passed on to third parties, such as in a land sale. These sums are subject to the same limits, depending on whether the client is an individual or a business. Businesses are limited to 11,000 shekels, while private individuals are limited to 50,000 shekels.

What are the limits regarding apartment sales?

The limits apply here, too, depending on whether the buyers are businesses or private individuals. They do not apply for transactions between family members. As part of the transaction report, the buyer will be required to state how the payment is being carried out – such as by check, bank transfer, mortgage.

Will fines be levied in January 2019, when the regulations take effect?

No, there’s a transition period through September 2019. Fines will only be levied before then if it’s a second violation. Religious interest-free lenders (gemachim) have an exemption for two years, or until a law takes effect regulating their operations.

Is there a statute of limitations on cash use violations?

Yes, between five and seven years, depending on the nature of the violation.

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1.6722049Thu, 6 Dec 2018 14:53:58Sami PeretzThu, 6 Dec 2018 14:54:00In the universe of household expenses, the price of tuna fish doesn’t figure prominently. But when Israel’s government undertook to gradually reduce tariffs on canned tuna, it had good reason to celebrate a small victory in its campaign to bring down the cost of living.

A two-year process that had eliminated a duty of 3.51 shekels (94 cents) on each kilogram of tuna, leaving just a 12% duty, had brought down the price to shoppers 14.5%.

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As it turns out, however, even that small achievement didn’t withstand the anti-competitive forces of the Israeli market: Two years later the price of a 160-gram can of the fish is even higher than when the tariff cuts started.

According to figures from the Central Bureau of Statistics, it averaged 7.50 shekels for a can in October 2013, fell to 6.90 when the treasury was lauding its achievement and, as of October 2018, was up to 7.80 shekels.

What happened? The treasury chief economist didn’t deny that when prices had fallen in 2016 it was because the price of raw tuna internationally had fallen. However, he argued that without the tariff reduction, falling tuna prices would never have been passed on to the Israeli consumer.

But a cursory examination of raw tuna prices in subsequent years doesn’t bear that out. The price was $1,400 a ton in October 2016, shot up to $2,300 a year later but was back to $1,400 in November 2018. But the tuna reached the Israeli supermarket shelf was constantly rising.

The industry’s response is that it takes time for changes in the global price to feed through into Israel.

Shraga Brosh, the president of the Israel Manufacturers Association, blames faulty government policy for the failure of tariff cuts to lower prices – not just for canned tuna but for a host of products.

“Israel chose to reduce tariffs from countries with whom we have no trade agreements, which was an unprofessional decision, unproven and a dangerous experiment with the Israeli economy that was taken despite warnings by manufacturers,” he says.

“Today we can declare the experiment a complete failure, as we had warned the government. The price of tuna didn’t fall, but canners were forced to close their factories in Israel and moved to import tuna and can it overseas,” Brosh said.

He doesn’t blame importers or retailers for high prices, but it’s hard not to point the figure at them. There are no major barriers to importing tuna and a number of companies are doing it, but note that StarKist controls 40% of the market.

That should be reason enough for the antitrust authorities to examine whether the strangling of local production with tariff cuts ended up coming at the cost of real market competition.

Actually, as Brosh notes, Israel lost twice in the process. Not only didn’t consumers enjoy lower prices for tuna, the local canning industry was forced out of business, laying off hundreds of workers in the process.

There were once four factories processing imported tuna for the local market, but soon there will be just one – Filtuna in Be’er Sheva. StarKist Israel announced recently it would shut down production and turn its Tirat Hacarmel facility into a logistic center for imported tuna. Eight of its 100 workers are losing their jobs in the process.

The high tariffs that had originally been imposed on canned tuna to protect those jobs. There’s no other economic case for processing tuna in Israel. The raw tuna has to be imported from Asia and local costs are high and have grown as environmental rules have grown tougher. Even when some factories switched to lower-cost natural gas for fuel, they still couldn’t compete with imports.

The industry couldn’t even make the case that it was a source for fresh, locally produced food.

A pity for the workers. As industry lobbyists continually pointed out in their losing fight to stop the tariff cuts, the industry provided jobs (albeit mostly at the minimum wage) to people with little education and in towns in the periphery where there are few jobs. The workers who are being let go have little prospect of finding alternative employment, all the more so because they are older.

Unfortunately, their sacrifice wasn’t for the greater good of the economy, but to increase the profits of importers and retailers.

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1.6722031Thu, 6 Dec 2018 02:37:26Avi Waksman Thu, 6 Dec 2018 02:37:18Israel’s debt is growing and stoking fears that the country is at the end of eight good years during which the ratio of debt to gross domestic product has fallen. The improvement in that key metric of a country’s financial health has been a product of a fast-growing economy and good fiscal management by the government.

In the first nine months of this year, government debt has risen by 33 billion shekels ($8.9 billion), or 4.4%. That’s about in line with the target of the Finance Ministry, which seeks to raise an average of 4 billion shekels a month, gross, in the domestic market.

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Still, the ministry has been looking carefully at the latest figures for GDP growth from the Central Bureau of Statistics. If the growth slowdown continues, the treasury will have a hard time continuing to cut the debt ratio.

The accountant general says the government debt (which is only the debt of the national government) was 59.2% of GDP in 2017. Total public sector debt, which includes, for example, local governments’ debt, was 60.9%.

Fifteen years ago, the figure was 100%, and in the middle of the 1980s it was 180%. The ratio has been declining since 2004, with a short break during the global economic crisis. If the figure doesn’t fall this year, it will be the first time since 2009.

In August, the Bank of Israel warned that, barring any surprises, total debt would probably increase to 61% this year from the bank’s estimate of 60.4% for 2017.

In shekel terms, debt has grown 50% in the past 15 years, but this isn’t an unusually big increase and by itself no reason to worry. Israel’s economy grew even faster in those years.

What’s worrying is that this year economic growth and debt growth may be growing at the same pace. The real rate of GDP growth in 2018 is expected to be about 3.5%, according to most economists – though the treasury measures nominal growth when it looks at debt.

Israel’s declining debt has helped boost its credit rating, reducing borrowing costs and thus letting the government spend on other programs, whether education, health or defense.

Concerns about the deficit have taken on added resonance in recent weeks after the Finance Ministry said that in the 12 months through October the deficit had grown to 3.6% of GDP, far above the 2018 target of 2.9%.

That marks a sea change from recent years when the deficit came in under target, mainly due to one-time tax windfalls that boosted collections above what the treasury had forecast.

The debt ratio was also lowered by a strong shekel, which made the government’s foreign currency obligations less expensive in shekel terms. More recently the shekel has weakened against the dollar. Only about 14% of Israeli debt was foreign debt as of the second quarter, but because of the weaker shekel this number rose sharply from just 11.5% at the end of 2017.

On Wednesday, the treasury updated the figures for November, and they showed little change. The deficit improved but to just 3.5% of GDP. An official said the treasury was still confident that the total for all of 2018 would fall to between 3% and 3.2%, “unless something catastrophic happens.”

“The deviation from the target of 2.9% won’t be significant when you’re talking about a budget of 400 billion shekels a year,” said a senior official who asked not to be named. “The deviation will be very marginal.”

In any case, even if 2018 ends well, 2019 is expected to be more challenging. GDP isn’t expected to grow significantly faster, but the budget deficit is expected to widen. The combination of slower growth and a growing deficit will increase the debt-to-GDP ratio unless the finance minister acts by cutting spending and/or raising taxes.

In a response to TheMarker, the treasury sought to downplay the impact of economic growth on the debt ratio. “The size of debt-to-GDP is very much influenced by market factors including the inflation rate and the exchange rate at the end of the year,” it said.

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1.6721701Thu, 6 Dec 2018 02:32:28Michael Rochvarger וEran AzranThu, 6 Dec 2018 02:32:18When the first U.S. real estate companies started coming to the Tel Aviv Stock Exchange a decade ago to issue debt, it looked like a win-win for everyone. The companies, most of them focused on the New York market, could borrow more cheaply than in the United States, and Israeli investors could get a piece of a hot property market.

But recent months have seen Israeli investors turn sour on the American companies, and this week the feeling was downright poisonous.

The TASE’s Tel-Bond Global index, which groups the 35 foreign property companies, has fallen 10% this year, an exceptionally steep drop for a bond index. This week alone the index has shed 2.4% even after posting a gain on Wednesday.

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Of the 27 billion shekels ($7.2 billion) in bond debt the companies have raised, some 10 billion of it is trading at junk yields of 10% or more. Another 4 billion is trading at between 6% and 9%.

“It seems the capital market has lost faith in the American bonds and anyone who can is trying to dispose of them indiscriminately,” said one institutional investment manager who asked not to be named. “The big test will come when it’s time to make repayments; then we’ll see who can keep their heads above water.”

All Year Holdings, which has raised 2.4 billion shekels in four bond issues, said that in the second quarter the company had inadvertently transferred $3.7 million to an entity controlled by controlling shareholder Yoel Goldman.

Goldman returned the money, All Year said, but the affair left investors wondering about corporate governance in the sector.

That worry was compounded by the fact that a similar incident occurred at Chosen Properties, where $2.5 million was accidentally transferred to controlling shareholder Moshe Orlinsky. Chosen has since said its board has adopted safeguards to ensure that an incident like that won’t happen again.

But the problems of the U.S. real estate companies have been building for some time. A surfeit of new issues in the first half of this year tested the market’s appetite to the limit. Mutual funds, which are big holders of the bonds, have suffered redemptions from their investors, forcing them to cash out of their holdings, often at any cost.

Short sellers have taken advantage of the segment’s woes and pushed bond prices lower. As of last week the value of shorts on foreign bonds was 516 million shekels, versus 400 million a month earlier and 300 million in August.

Yishay Sasson, senior analyst for real estate at Discount Brokerage, said investors’ chief concern is that the companies, many of which are registered in the British Virgin Islands, won’t be able to roll over their debt in the new era of rising interest rates.

“The business model of real estate companies – not just Americans – is based on rolling over debt by redeeming older bonds and issuing new ones,” he said. “The fear that has surfaced in recent weeks is that with the prevailing high bond yields, BVI companies won’t be able to raise new capital.”

Sasson said that at the same time, high borrowing costs in the United States would reduce companies’ cash flow and make it harder for them to meet repayments.

Brookland Upreal announced two weeks ago that it wouldn’t be able to make repayment on 150 million shekels in bond debt and asked bondholders to negotiate a new payment schedule. The company blamed cash-flow problems arising from slower-than-expected sales in its Brooklyn real estate market.

Another company, Extell, announced that it was redeeming half its Series Aleph bonds, paying back 525 million shekels in principal and another 25.7 million this week rather than rolling over the debt. It moved up repayment to December 3 from the end of the year.

It was the first time an American property company opted for repayment.

Extell bonds trade at junk levels and its credit rating was lowered to A-3 from A-2 by the Midroog rating agency, though it was removed from the Credit Watch list in September. Extell, which has another 585 million shekels in bonds due next year, has been contending with a slowdown in the New York luxury real estate market.

Not everyone is bearish on the Americans. One market source, who asked not to be named, said he wasn’t expecting any new bond issues during the bad atmosphere, but said many of the companies were performing well enough.

An analyst speaking on condition of anonymity agreed. But he warned: “Not all of the companies have lost investors’ confidence, but if the companies don’t manage to calm investors, the repricing we’ve seen in recent days will hold and will make it hard to roll over the debt these companies need.”

Eran Yaakov, the head of the Israel Tax Authority, said Wednesday he is opposed to reducing the capital gains tax. “You have to decide whether you want to give preference to someone investing in the stock market over someone who works and pays a rate of 47% on his income,” Yaacov told a conference on taxation and the capital markets. “If we were in an environment where capital gains taxes were higher, it would be a different story.” He was responding to a call for lower capital gains tax by Science Minister Ofir Akunis, who said it would encourage more stock market investment. Yaacov pointed to figures from the Organization for Economic Cooperation and Development showing that Israel’s 25% capital gains tax is near the weighted average of 23% for member countries. Yaacov said he supported ending the 5,000 shekel ($1,340) a month exemption on taxes on income from apartment rentals, saying it encouraged tax evasion. (Avi Waksman)

SodaStream ends Tel Aviv trading as PepsiCo completes acquisition

SodaStream said goodbye to the Tel Aviv Stock Exchange (and the Nasdaq) on Wednesday after PepsiCo completed its $3.2 billion acquisition of the maker of home carbonated drink machines. The last day of trading in SodaStream shares was Tuesday, and they were removed from TASE indexes Wednesday. SodaStream delivered impressive returns for investors, with its stock climbing nearly nine times in the three years of its TASE listing. SodaStream had marketed itself as a more environmentally friendly and healthier alterative to brands like Coca-Cola and Pepsi. That and PepsiCo’s desire to diversify out of its core brand led to the acquistion. “With its customizable options, SodaStream empowers consumers to personalize their preferred beverage in an environmentally friendly way and provides PepsiCo with a significant presence in the at-home marketplace,” PepsiCo CEO Ramon Laguarta said, marking completion of the acquisition. (Guy Erez)

Matomy shares surge on proposed rescue plan

Matomy shares soared Wednesday after the financially troubled digital-advertising firm unveiled a plan to convince bondholders not to seek immediate repayment of their debt. Under the offer, which will be put to a bondholder vote in the coming days, Matomy shareholders will inject $10 million into the company. Major shareholders, which include the French advertising firm Publicis and hold a 55% stake in the company, have agreed to contribute funds, Matomy said. In addition, Matomy will negotiate new terms for it to buy the 10% stake it doesn’t own in Team Internet, with the aim of reducing the price. For their part, bondholders will be asked to agree to a delayed repayment to as late as 2022. They will not be asked to write off any of their debt. Matomy shares finished 28% higher at 35 agorot (9 cents). (Michael Rochvarger)

Pressed by investors, Rami Levy agrees to reduce his compensation

Under pressure from institutional investors, Rami Levy, the founder and controlling shareholder of the publicly traded supermarket chain named after him, agreed Wednesday to take considerably less compensation over the next three years. Under the proposed terms, Levy – or more exactly his privately controlled management company – will be paid a share of the pretax profits on a sliding scale ranging from 0.67% to 2%, half the rate he sought. In addition, the combined rent the chain will pay his private companies for stores will not exceed 7% of the chain’s sales and marketing and management costs for the year, rather than 8%, Lower rates will prevail on rents for other properties like warehouses and logistics centers. A shareholder meeting to approve the new employment contract has been delayed by three days to December 12. Rami Levy shares ended down 0.05% at 189.50 shekels ($50.83). (Yoram Gabison)

Tel Aviv stocks finish higher in heavy trading

Tel Aviv shares finished higher on Wednesday in heavy trading. The benchmark TA-35 index rose 0.35% to end at 1,637.51 points, while the TA-125 added almost 0.6% to 1,480.55, on turnover of 1.65 billion shekels ($440 million). Trading was heavier than usual as exchange-traded funds bought TA-35 and TA-125 component shares to make up for SodaStream’s delisting Wednesday. Among blue-chip gainers, Israel Chemicals rose 1.8% to end at 21.59 shekels and Nice climbed 1.3% to 437. Teva Pharmaceutical Industries dropped 1.7% to 78. Bank shares were mostly lower, paced by losses of 1.2% to 24.29 for Leumi and 1.1% to 24.675 for Hapoalim. Bezeq group shares continued to slide, with Bezeq ending down 1.5% at 4.01 and B Communications losing 2.8% to 28.39. Ham-Let led TA-125 stocks higher, adding 4.6% to 76.30. Opko Health dropped 4.5% to 13.50. In foreign currency trading, the euro slid nearly 0.55% to a representative rate of 4.2289 shekels. (TheMarker Staff)

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1.6719994Wed, 5 Dec 2018 04:45:50Ronny Linder-GanzWed, 5 Dec 2018 04:45:42Israel’s physician shortage has become so acute that the Civil Service Commission is allowing government hospitals to hire retiree doctors back into practice. Desperate medical centers are happy to have them, and to pay them well.

The new directive, included in a letter sent to hospital heads two weeks ago, targets specialties with the greatest shortages, including psychiatry, internal medicine, emergency medicine, rehabilitation, nuclear medicine and trauma.

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About 100 posts in psychiatry are unfilled at government hospital, with a similar shortfall in clinics and hospitals operated by the country’s health maintenance organization, according to most estimates.

“At every psychiatric hospital, about 10% to 20% of psychiatric positions are unfilled, and in the community [clinics] the situation is even worse,” said Prof. Yechiel Levkovitz, the head of the Be’er Ya’akov Mental Health Center and head of the psychiatry department at Tel Aviv University’s medical school.

“The profession has suffered in recent years from a poor image despite the potential there now is to combine the major advances in brain research with talk therapy.”

The shortage has not only hurt the quality of services psychiatrists can provide but has exacerbated the problem of teaching a new generation of psychiatrists, he said. “If new people don’t join the system there won’t be anyone to train the young generation because when we have to contend with such a severe personnel shortage, there isn’t enough time for training.”

As it is, many hospitals have contended with the overall doctor shortage in recent years by convincing physicians not to retire when they could. Doctors are allowed to remain at their jobs until age 70 and continue to accumulate more pension rights.

At Sheba Medical Center, Tel Hashomer, Israel’s biggest hospital, about 150 doctors of retirement age remain on the staff — those up to age 70 working half-time and up to age 73 one-quarter time. A few have even stayed on after age 73.

“At age 67 doctors are still strong, they contribute a lot and are very experienced,” said Prof. Yitshak Kreiss, Sheba’s director general. “Many of them provide unique medical services and continue to teach students. Nothing changes in a 67-year-old when he wakes up and he is 67 and one, so why not continue working? “

The one rule Sheba imposes on them is that they can’t fill managerial positions. “It’s important to advance the young,” said Kreiss.

What is new is not the employment of older physicians, but that the Civil Service Commission is now letting government hospitals hire them back after they have officially retired.

To lure them back, the commission is allowing hospitals to offer them salary and conditions identical to what they enjoyed just before they retired — which usually means they resume getting the highest pay of their careers. The generous terms reflect how desperate the commission is to fill jobs.

In addition to the specialties with acute shortages, hospitals in Israel’s north and south are contending with shortfalls across the board.

“Where there are problems nationwide, we in the periphery feel it even more, “said Dr. Erez Onn, director of Poriya Medical Center in Tiberias. “Our ability to persuade a doctor from the center [of the country] to come to the north with all the promises for quality of life is almost zero.”

Hospital in the periphery tempt applications with offers of managerial posts and are authorized to make 500,000 shekel ($134,000) signing bonuses. But, said Onn, it’s not enough to compensate doctors to give up lucrative private clinics and barely covers the costs of relocating.

Onn said he hoped approval to hire retired doctors would help alleviate the problem. “If I haven’t been able to hire an oncologist for two years and I can continue with some that has completed his post as a unit head, that gives me breathing room,” he said.

That said, he added: “It’s a temporary solution, an option of new choice.” He said the real solution was to allow hospitals like his to offer better packages to doctors, including help for spouses to find employment and help in schools for their children.

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1.6719990Wed, 5 Dec 2018 03:49:12Michael RochvargerWed, 5 Dec 2018 03:49:03Prime Minister Benjamin Netanyahu isn’t the only one contending with Case 4000. Israel’s biggest banks were left with 1.6 billion shekels ($430 million) of debt from Eurocom Communications, the holding company controlled by Shaul Elovitch, whose indictment the also recommended in the affair. Police and Israel Securities Authority probes helped push Elovitch in bankruptcy last year, leaving his bank creditors holding Bezeq group shares they had been pledged as collateral.

Since then, however, the banks have failed to find a buyer for Eurocom’s two chief assets, Bezeq itself and the satellite operator Spacecom. Since news of the police recommendation on Sunday, Bezeq group shares have plummeted in Tel Aviv Stock Exchange trading.

The banks do not control Bezeq directly. They hold 55% of a company called Internet Gold, which in turn holds 65% of B Communications, which has a controlling 26.3% stake in Bezeq itself. Eurcom is managed by court-appointed administrators.

Israel Discount bank is the biggest of the creditors, holding half the debt. Bank Hapoalim holds 600 million and First International Bank of Israel the rest. A sister company, Eurocom Real Estate, owes 260 million shekels to Mizrahi Tefahot Bank.

Over the last year and a half the banks have tried to reach deals to sell Bezeq to three different buyers, including the Israeli-American real estate developer Naty Saidoff. But they failed in each case.

The one sale of a Elovitch asset they have succeeded in completing was Enlight Energy, for 133 million shekels. But much of the proceeds was used by the banks to participate in a secondary share offering Internet Gold needed to conduct in order to repay bondholders.

The banks’ headaches with Bezeq group continue. Internet Gold is again threatened with insolvency and could end up in control of bondholders, thereby losing the banks their main collateral on the Bezeq debt.

Meanwhile, Bezeq itself is suffering serious business setbacks and regulatory problems. Its third-quarter results, published two weeks ago, showed a 27.3% drop in net profit to 234 million shekels and its shares have fallen 17.6% this year. On Tuesday they dropped another 2.7% to 4.07, leaving the company with a market cap of about 11.3 billion shekels.

Because so many Bezeq executives have been accused by police of involvement in Case 4000 and other offenses, the leading investment banks have refused to act as advisers on any sale. As a result Internet Gold CEO Doron Turgemen recently selected Oppenheimer & Company and Migdal Investment Banking, two companies with little mergers and acquisition experience, to handle the sale of B Comm.

Warburg Pincus, the U.S. private equity firm that is buying Leumi Card, is in talks to sell part of the Israeli credit card company to Allied Holdings, an Israeli investment company chaired by Prof. Itzhak Swary. Under the deal, Allied would take between 5% and 10% of Leumi Card at a 2.5 billion shekel ($670 million) valuation. That is the same valuation at which Warburg agreed to buy control of Leumi Card from Bank Leumi and Azrieli Group. Allied has a low profile, but its holdings include Champion Motors, the Israeli importer of Volkswagen Group cars, and electronics importer Newpan. It shares the concession for the Carmel Tunnels toll road in Haifa, and owns real estate in Israel and abroad. Warburg has been seeking one or more partners for its Leumi Card holding since regulators barred a plan to sell back 20% of the shares to Leumi. (Michael Rochvarger)

Corning reportedly in talks to buy Israel’s Teldor Cables

Corning Inc., the U.S. maker of specialty glass and ceramics, is in talks to buy Israel’s Teldor Cables & Systems at a $50 million valuation, sources have told TheMarker. The sellers are Kibbutz Ein Dor and the private equity fund Tene Investment Fund, each of which owns about 50% stake in the maker of cables and wires used primarily in the telecommunications industry. Ein Dor might retain a small stake in Teldor, which operates plants on the kibbutz and at Kibbutz Geshur. For Tene, the valuation means it will have earned relatively little on its Teldor investment. The fund bought its stake from Ein Dor a decade ago at a $46 million valuation, amounting to a return of less than 9% over the life of the investment. If Corning goes through with the acquisition it will be its second in Israel, after its purchase of Mobile Access in 2011 for $180 million. Neither Ein Dor nor Tene would comment on the report. (Guy Erez)

Taptica shares plunge after CEO quits following fraud ruling

Shares of Taptica International plunged in London Tuesday after the Israeli mobile-advertising company said CEO Hagai Tal was resigning, a day after a Delaware court found he had committed fraud. In a suit brought by Private Equity firm Great Hill Equity Partners, Delaware Chancery Court ruled that Tal had committed fraud in connection with statements he made about the $115 million sale in 2011 of a e-payment-processing company called Plimus, in which he was both a shareholder and CEO. Great Hill alleged that Tal had provided false or distorted seller disclosures before the sale, including failing to disclose problems with payment-clearing providers like Paypal. “The plaintiffs in the case are entitled to restitution for breaches of certain representations and warranties,” Taptica said in statement. Shares of Taptica, which had a net profit of $10.8 million on sales of $144 million in the first half, ended down 37% at 197 pence ($2.52). (Yoram Gabison)

Teva patent dispute with Swiss firm reaches U.S. Supreme Court

Teva Pharmaceuticals duked it out in the U.S. Supreme Court on Tuesday with a Swiss pharmaceutical company, which is trying to salvage a patent behind its lucrative anti-nausea drug in a case that could make it easier to cancel key patents, especially among smaller drugmakers. Justices asked tough questions of both sides during an hour of oral arguments in an appeal by Helsinn Healthcare of a lower court’s decision to invalidate its patent on Aloxi, which paved the way for Teva to launch a generic version of the drug in March. Aloxi is used to prevent nausea and vomiting in patients receiving chemotherapy. The Supreme Court previously refused Helsinn’s request to block the lower court ruling while it considered the company’s case, allowing Teva to bring its Aloxi copycat to market. Teva claims Helsinn forfeited its patent right by reaching a marketing deal for the drug with another firm before the drug was patented. (Reuters)

Tel Aviv shares fall as optimism on U.S.-China trade ebbs

The Tel Aviv Stock Exchange joined world markets in moving sharply lower Tuesday as optimism over a rapprochement on trade between the U.S. and China faded. The TA-35 and TA-125 indexes each fell about 1.3% to close at 1,631.68 and 1,472.21 points, respectively, on turnover of 1.33 billion shekels ($360 million). Bezeq group shares were hit hard again, with Bezeq itself down 2.7% to 4.07 shekels and parent company B Communications losing 7.6% to 29.20. TowerJazz reversed course after rallying Monday, falling 5.7% by close to 59.88. Among gainers, Property & Building shares jumped 5.9% to 298.40 after parent Discount Investment Corporation offered to buy 20% of the shares at 290 shekels each. BioTime rose 4.8% to 5.63 after reporting positive preclinical results for its HyStem technology, in mitigating ischemic brain injury. Bezeq said Monday it raised 578.3 million shekels in a bond offering to institutional investors at an annual interest rate of 2.7%. (Eran Azran)

CodeMonkey, an Israeli startup that has developed games to teach computer coding, said Tuesday it had been acquired by the Chinese company TAL Education Group for $15 million. Traded on stock markets in China and the United States, TAL provides after-school tutoring services in China for students from elementary through high school. TAL stands for Tomorrow Advancing Life. “TAL is an ideal partner for CodeMonkey, which will let us accelerate our entry into the Chinese market – a country we deemed a key market several years ago – and support expansion of our operations in the U.S. and elsewhere around the world,” said CodeMonkey CEO Jonathan Schor. Founded in 2013, CodeMonkey has raised $2 million, most of it from Invictus Capital and the company EduLab. For the past four years it’s game-based lessons have been used in 2,000 Israeli schools every year to teach 250,000 students. (Irad Atzmon Schmayer)

InnovoPro raises $4.2 million to develop foods using chickpea proteins

InnovoPro, which is developing high-tech foods using proteins derived from chickpeas, said Tuesday it had raised $4.2 million. The backers include Erel Margalit, the founder of the Jerusalem Venture Partners funds, the Swiss retailer Migros and the Chinese venture capital fund Bits x Bites. Founded three years ago, InnovoPro claims to be the first company to produce protein concentrate from chickpeas and has developed prototype products such as egg-free mayonnaise, the first of which will reach the market in 2019. “In view of the global food scarcity issues, the world cannot continue consuming meat and dairy food as it does today,” Margalit said. “As the world’s population continues to grow, we need to find new, sustainable food solutions. InnovoPro’s development is a global breakthrough poised to revolutionize the way the world consumes protein.” InnovoPro said it would use the proceeds to scale production, support sales and expand into strategic markets. (Ora Coren)

Playtika buys German mobile games maker Wooga for an estimated $100 million

The Israeli mobile gaming firm Playtika said Monday it had bought German rival Wooga in a deal estimated at more than $100 million. Playtika, which offers a number of online games, said the acquisition was part of its strategy to diversify into other types of games such as those with stories and adventures. It noted that its acquisition a year ago of Jelly Button Games had seen 12-fold revenue growth. “We see great opportunities for Playtika in the casual games genre and our acquisition of Wooga firmly positions us for this next phase of our evolution,” said Robert Antokol, Playtika’s chief executive. Playtika said the acquisition would combine Wooga’s story-driven capabilities with Playtika’s data-driven personalization and performance marketing expertise. “This combination will accelerate Wooga’s growth and further position Playtika as a serious competitor in the casual games arena,” it said. (Reuters)

Shin Bet security service unveils second round of tech accelerator program

With so much interest in the first round of its technology accelerator program, the Shin Bet security service is seeking startups to join a second round. The agency, which runs the program with Tel Aviv University’s TAU Ventures arm, said it would select nine companies for the program, which provides each company with a $50,000 research grant as well as mentoring advice – from university faculty as well. Seven companies were chosen for the first round six months ago from more than 100 applicants, and the Shin Bet has already benefited from access to the technology developed, said TAV Ventures partner Nimrod Cohen. “The program aims to expose the Shin Bet to civilian technology and see what use it can put it to,” he said. “If in the past technology breakthrough occurred in defense and then made its way to the civilian sector, today it’s the reverse.” The deadline for applications is December 30. (Irad Atzmon Schamyer)

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1.6719988Wed, 5 Dec 2018 03:06:31Michael RochvargerWed, 5 Dec 2018 03:06:22A speech by Rod Rosenstein — the U.S. deputy attorney general is best known for his role in the Mueller investigation, but his purview also includes corporate crime — could spell bad news for Bank Hapoalim and Mizrahi Tefahot Bank.

The two lenders are the subjects of a lengthy investigation by the U.S. Justice Department into their alleged roles in helping American citizens evade U.S. taxes from 2000 to 2011. Both banks have already set aside hundreds of millions of shekels in expectation of penalties.

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In a speech to the 35th International Conference on the Foreign Corrupt Practices Act in Washington on Thursday, Rosenstein outlined a new policy regarding steps companies will be required to take in order to win the cooperation of the Justice Department and negotiate a settlement.

The main message Rosenstein relayed was that agreements would be difficult to reach unless the executives involved are required to personally pay fines and even be forced to resign if they are still in their jobs.

“It is important to impose penalties on corporations that engage in misconduct. Cases against corporate entities allow us to recover fraudulent proceeds, reimburse victims, and deter future wrongdoing,” he said.

But Rosenstein went on to say: “The most effective deterrent to corporate criminal misconduct is identifying and punishing the people who committed the crimes. So we revised our policy to make clear that absent extrao rdinary circumstances, a corporate resolution should not protect individuals from criminal liability.

Our revised policy also makes clear that any company seeking cooperation credit in criminal cases must identify every individual who was substantially involved in or responsible for the criminal conduct.”

Among Israeli bankers, the new policy is most relevant to Eldad Fresher, the CEO of Mizrahi since 2013. Before and during the year the alleged tax violations occurred, he was chairman of the bank’s Swiss unit and head of its financial division, responsible for international activities. Dan Lubasch, Mizrahi Switzerland’s CEO since 2011, may also be affected.

Most of the senior Hapoalim executives connected with the alleged affair have left the bank, but a number of middle managers who remained now find themselves in the Justice Department’s crosshairs.

Of the three Israeli banks that have been investigated, only Bank Leumi has settled — agreeing to pay a $400 million penalty four years ago. That, however, may not be a good barometer for what Hapoalim will have to pay, on top of the threat that individual executives will also face penalties.

In August, the Justice Department offered Mizrahi — Israel’s third-largest bank, but much smaller than Leumi and Hapoalim — a settlement that included a $342 million fine.

Mizrahi rejected it, but also opted to set aside another $116.5 million in its second-quarter financial report, in expectation of a future penalty. Until then, its provisions had amounted to just $162 million. Meantime, the two sides are negotiating.

At Hapoalim, the provisions connected with the probe have reached $365 million, with total costs, including legal fees, of 2 billion shekels ($540 million). It’s not clear when the bank will settle with U.S. authorities.

In any event, Rosenstein made clear that the U.S. would not pursue every employee of a company that committed offenses, especially if their role was insubstantial and is unlikely to lead to prosecution.

“We want to focus on the individuals who play significant roles in setting a company on a course of criminal conduct. We want to know who authorized the misconduct, and what they knew about it,” he said.

The odds are growing that Bank Hapoalim will divest its Isracard credit card unit through an initial public offering, with the balance of the holding being paid out to Hapoalim shareholders as a stock dividend. The two-stage divestment of Israel’s biggest credit card company will likely occur in the first quarter of next year, and no later than May. The plan comes as negotiations to sell Isracard to private equity funds Bain of the U.S. and Sky of Israel reportedly reached a dead end. Hapoalim is under government orders to reduce its holding in its credit card business to 40% by January 2020 and sell the rest a year later. Isracard is not expected to be valued at more than 1.3 billion shekels ($350 million), in part because an IPO means Hapoalim can’t demand a control premium. A stock dividend would be welcomed by Hapoalim shareholders, who were not paid a cash dividend in the past two quarters. (Michael Rochvarger)

Israel Chemicals is suing IBM for 1.1 billion shekels ($300 million) in damages it says it suffered from a failed computer integration project. In a suit filed in the Tel Aviv District Court Monday, ICL claimed that the U.S. tech giant failed at each stage of rolling out an enterprise resource planning system that was supposed to replace multiple systems is use by the company. It said that IBM systematically concealed the problems, delayed the implementation of changes requested by ICL and needless added to the cost of the project. After the problems became increasingly evident and posed a risk to its business operations, ICL’s board voted in September 2016 to end the project and its contractual relationship with IBM. “As a result of the failure of the project, [ICL] was forced to write off the full amount of its investment in the project, a huge sum of $300 million, $100 million of which was paid to IBM,” the suit said. ICL shares ended down 1.5% at 21.97 shekels. IBM said in response that it "believes this case has no merit and will vigurously defend it." (Yoram Gabison)

ILDC in talks to sell its Rimonim Hotels unit to Dan Hotels

Israel Land Development Company is in talks to sell its money-losing Rimonim Hotels chain to Dan Hotels, whose properties include the iconic King David Hotel in Jerusalem. ILDC said Monday it was seeking to sell its 83% stake in Rimonim’s parent, ILDC Hotels, at a 142 million shekel ($38 million) valuation — 32 million more than ILDC Hotels is valued on the Tel Aviv Stock Exchange. ILDC Hotels shares jumped 20.8% to close at 5.80 shekels. Despite record tourism to Israel this year, Rimonim lost 6 million shekels in the first nine months of the year, widening from a 5 million loss a year earlier, as revenues fell 14% to 157 million due to a drop in the number of properties it manages to eight. A hotel industry source told TheMarker that a merger with the much bigger Dan chain would help Rimonim reduce costs and return to profitability. “A hotel management company needs a certain level of volume,” he said. (Eran Azran)

Negotiations to sell Osher Ad grocery chain to Apax said to hit snag

Negotiations for the Apax Partners private equity fund to buy control of the Osher Ad supermarket chain have hit a snag, sources told TheMarker on Monday. The two sides are at odds in the talks, which value the chain at up to 1 billion shekels ($270 million), over control. Zehavit Cohen, Apax’s CEO, insists her fund will have a majority stake while Oshar Ad’s three partners — Avraham Moshe Margalit, Aryeh Boim and Yehuda Landau — want to retain at least a 51% stake. The sources, speaking on condition of anonymity, said Apax had already completed due diligence of the deal before the three partners expressed reservations about how the chain would be managed under the new ownership. Osher Ad operates 18 supermarkets in Israel and one in Brooklyn catering to ultra-Orthodox shoppers and is expected to show 4 billion shekels in sales this year. Apax declined to comment. Osher Ad denied there have been any talks at all. (Eran Azran)

Tel Aviv shares eke out gains as Bezeq group sinks

Tel Aviv shares spent Monday drifting lower but managed to eke out a gain for the day by staying just above the minus line. The benchmark TA-35 index finished at 1,653.85 points, up 0.1% for the day, while the TA-125 advanced 0.1% to 1,491.08, on turnover of 1.15 billion shekels ($310 million). TowerJazz led the gainers on the TA-125, climbing 5.9% to close at 63.50 shekels. The chip maker said Korea Electrotechnology Research Institute had begun prototyping an integrated circuit based on a TowerJazz platform. Elbit Systems rose 0.5% to 468.50 after it announced it had been awarded a $112 million contract to supply an unnamed Asia-Pacific country with advanced airborne intelligence systems. The Bezeq group tumbled in the wake of police recommendations to indict Prime Minister Benjamin Netanyahu and others in Case 4000. Parent company B Communications dropped 6.3% to 31.59 and Bezeq itself lost 3.7% to 4.19. (Jasmin Gueta)

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1.6717968Tue, 4 Dec 2018 05:32:06Ruti LevyTue, 4 Dec 2018 04:15:51The offices of Nutrino Health in Tel Aviv have a spacious kitchen, with fresh produce laid out on a table and jars of nuts and dried fruit on shelves. There’s also a bottle of Champagne, left over from last month’s celebration when the medical device giant Medtronic announced that it was acquiring the Israeli startup after a successful two-year collaboration.

Medtronic, a company with a market cap of $125 billion, didn’t reveal what it paid for Nutrino because the amount wasn’t big enough to require it. But the estimates are around $80 million, eight times the capital invested in the startup since it was founded a decade ago.

Nutrino’s guiding principle is that food affects people differently, and cookie-cutter diets aren’t sufficient. Its first product was a free app for creating a personalized food plan. It offered menu plans based on each user’s personal goals — such as eating more healtful foods, losing weight or building muscle — and taking into account each user’s physical activity and medical profile.

Over time, Nutrino assembled a valuable database for medical device companies on the links between diet, personal habits and physiology. The other half of its database comes from 400 information sources — academic papers, information from food companies, data from wearable devices such as insulin pumps.

Another top source is photographs of the food eaten by users and stored on their cellphones.

"We needed to document food. It could be in speech or writing, but in practice we discovered that people like to photograph their food," says Yael Glassman, Nutrino’s CEO. “It’s easier for users and it also adds a personal context — you don’t even have to open the app when you take pictures. You can add the pictures afterward and important data such as where and when you eat. We automatically extract data about your diet from the images on your device.”

Nutrino’s algorithms rate the foods that were photographed according to how the user’s body has reacted to eating them.

The company established partnerships not only with Medtronic but also with Abbot Laboratories and Dexcom. The goal of the cooperation with Medtronic was particularly ambitious: the development of an artificial pancreas for people with Type 1 diabetes — formerly called juvenile diabetes — by monitoring blood sugar levels and introducing insulin as needed.

Today, people with Type 2 diabetes typically use an insulin pump to supply fixed amounts on a continual basis. The drawback is that users have to test their blood sugar levels throughout the day and the pumps can’t adjust themselves automatically to the body’s changing demand for insulin.

Buying Nutrino will give Medtronic’s artificial pancreas the ability to know what foods the user is eating and adjust insulin levels automatically. Apart from that, Medtronic is interested in helping health care systems to reduce patient care costs, a task that information and artificial intelligence companies such as Nutrino can help achieve.

“Food is something that interests the employees here, even when they are out of the office,” says Glassman. “Among our employees we have vegans, diabetics and athletes, and it’s one of the things that helps us to recruit staff — mission-driven companies that create an emotional connection can be more competitive.”

Diet is also personally important to Nutrino’s two founders. Yaron Hadad, its chief scientist, was one of the first recruits to win recognition as a vegan by the Israel Defense Forces. Jonathan Lipnik, Nutrino’s president, has his own family history.

“My grandparents didn’t reach a ripe old age because of heart problems; I’ve been taking blood pressure medication since the age of 30 and have been under the supervision of a nutritionist since I was 8, so the topic is close to my heart,” he said.

Hadad and Lipnik met in the army, where they served in the research unit of the personnel division and first encountered the world of statistics. They won an award for helping to cut the drop-out rate for combat troops by 50% by their statistical research on what candidates make the best soldier.

When they founded Nutrino in 2011 it was with the idea of using those same kind of methods in the realm of diet. Glassman, who joined as CEO in 2015, brings business experience to the venture after a career at various U.S. startups and an MBA from the Massachusetts Institute of Technology. It was Glassman who brought Nutrino to Medtronic three years ago.

Nutrino made the transition from a consumer app for wellness to a digital health company that provides data to medical devices with a focus on chronic diseases, diabetes in particular.

“The idea and the product behind Nutrino could have been adapted to all kinds of purposes, like dieting, for example,” Glassman said. “But in the end you have to decide on a route and a goal that are commercially viable.”

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1.6717425Mon, 3 Dec 2018 18:07:05David RosenbergMon, 3 Dec 2018 17:46:17There was a brief, fleeting moment 45 years ago when OPEC seemed to rule the world. As the Yom Kippur War was raging, the cartel’s Arab member states imposed an oil embargo on the United States and a handful of other countries, seeking to pressure them on Israel. Long lines formed at gas stations and petroleum prices quadrupled. The world economy sank into recession, but OPEC countries now enjoyed wealthy once only imagined.

Flash-forward to this week and things look very different. The Organization of the Petroleum Exporting Countries has become so irrelevant that Qatar – one of its oldest members – announced it would quit next month, simply because it didn’t think membership was worth the trouble.

As oil powers go, Qatar is a minor player. Its share of crude oil reserves is just 2.1 percent of the OPEC total, and its production is just 5 percent of the Saudi level. The hydrocarbon that has made Qatar its fortune – and pays for such babbles as the Al Jazeera news network and suitcases bound for Gaza, stuffed with millions in cash – is natural gas. It is the world’s biggest producer of liquefied natural gas and has plans to ramp up output even more.

If Energy Affairs Minister Saad al-Kaabi is to be taken at his word, Qatar would rather focus on its natural gas. But Kaabi’s explanation sounds less than authentic. There’s no reason why Qatar can’t belong to OPEC and accept its dictates, and happily export however much gas it wants – because gas isn’t part of OPEC’s mandate.

Kaabi said the decision isn’t tied up with Gulf politics and the embargo Saudi Arabia has imposed on it since June 2017. But that also sounds less than authentic. Saudi Arabia is an oil power in its own right, but its status is enhanced immeasurably by being a founder and leader of the storied cartel. It’s fair to assume that the Qataris don’t mind the loss of Saudi prestige that their exiting OPEC creates. Since they are a second-string member of the oil cartel, they lose very little in the process.

The reality is that, even at the peak of its power, OPEC was never the cartel it was cracked up to be. The 1973 embargo spread panic at the time and aroused fears that the world balance of power was shifting to the Middle East.

But in fact, not all OPEC members adhered to the embargo (just its Arab ones), and the demand that Israel withdraw to the 1949 armistice lines led nowhere.

The embargo’s success had more to do with the world supply and demand balance at the time. American oil production had been falling for some time and its reliance on imports was growing. It had little spare capacity, so when the embargo came the world was unprepared.

There’s a good reason OPEC has never tried to impose an embargo like that again. The wealth generated from higher oil prices meant many of its members found they had a stake in the world economy. Causing global economic slowdowns undermines the demand for energy and reduces the value of their investments in Europe and America. The cartel now prefers to be seen as a responsible world citizen that doesn’t engage in politics.

In any event, the organization’s ability to manipulate prices is extremely limited. It may produce 60 percent of the world’s internationally traded oil, but OPEC oil isn’t the only energy in town. Every time the price of oil gets too high, market forces kick in to adjust demand and bring it down. Oil-consuming countries develop their own petroleum resources, rely more on renewables and, more than anything else, they conserve energy.

Pushing prices lower to keep out the competition doesn’t work in the long run. That’s because OPEC members desperately need their oil revenues to fund generous government programs that keep their populations content and their economies running, in lieu of any other competitive industries. Even the legendarily wealthy Saudis borrowed $17.5 billion in international capital markets two years ago because they couldn’t risk cutting spending after oil prices crashed.

In any case, to be a successful cartel your members have to show discipline and unity of purpose. OPEC has never enjoyed either. It’s difficult to monitor oil output and there are no ways of effectively enforcing quotas, so members are tempted to cheat. OPEC's membership is too disparate and often at odds with each other – witness the warfare between the Saudis and Iran. The Saudis are prepared to pump more of their oil to ensure the world needs less Iranian petroleum. The Iranians regard that as muscling in on their quota.

Many of its members are in such political disarray, they couldn’t manage their supply even if they wanted to. Thus, when OPEC agreed in 2016 to reduce supply to lift prices – its members' first such pact in 15 years – the strategy seemingly worked. Except that it was no strategy at all: Through the immense incompetence of its government, Venezuela couldn’t stop a freefall of its oil production. Voila, much of the quota was met by default. The rest was covered by problems in Iran and Libya.

The future for oil – and therefore of OPEC – looks no brighter than in the past. In contrast to 1973, U.S. oil production has risen rapidly and America is now the world’s largest producer. Electric cars and renewable energy are on the rise, regardless of what Donald Trump thinks.

Even the Saudis understand that the good times are coming to an end. When he isn’t dismembering opposition journalists, Crown Prince Mohammed bin Salman is working feverishly to build an economy for his kingdom that doesn’t rely on oil. Little doubt he's looking at Qatar's OPEC exit as a slap in the face. But the truth is it's no less an admission of the oil reality than MBS' plans for Saudi Arabia.

The contract will be performed over six years. Elbit (ESLT.O) did not name the country.

Last week, Elbit acquired the Israeli government's shares of Israel Military Industries. Elbit paid $495 million to the state in one of the biggest deals in Israel’s weapons sector to date.

Elbit operates primarily in the homeland security and defense arena, and has been at the forefront of innovative approaches towards dealing with conflicts and ongoing terrorist activities. Its products include thermal imaging systems, guided missiles and unmanned vehicles.

The company has played an active role in supplying the Israeli military with the technology needed for most Israeli aircrafts like the IAI Lavi fighter aircraft and for the Israeli Merkava tank. Through the years, Elbit has expanded worldwide and has several companies in the United States, Brazil, and the United Kingdom. More recently, Elbit’s involvement in providing surveillance components for the West Bank separation fence has sparked divestment by some groups and organizations in Europe.

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1.6704270Mon, 3 Dec 2018 05:06:46TheMarkerMon, 3 Dec 2018 01:58:08Israel Railways has lost millions of shekels due to the problematic launch of the new rail line to Jerusalem, the Government Companies Authority stated in its third-quarter financial report, which it published over the weekend.

Israel Railways acknowledged that the need to pull train cars off its heavily used, established Haifa-Tel Aviv line in order to run trial journeys on its line between Jerusalem and Ben-Gurion International Airport, cost it revenues from passenger tickets, leading to the loss of bonus money from the government.

The train was also forced to halt train service to the Ben-Gurion and Modi’in stations during summer vacation and the September Jewish holidays in order to electrify the tracks.

The railway company diverted trains from the north-south line to the new Jerusalem line because new cars for the latter line had not yet arrived. The trains, which ordinarily serve 1,000 passengers per trip up and down the coast, were instead used to transport an average of 150 passengers to and from Jerusalem.

The financial losses cast questions on statements by Israel Railways executives, who said that the early launch of the Jerusalem line, amid pressure from Transportation Minister Israel Katz, served the company’s business interests.

The national railway lost 287 million shekels in the third quarter, and had an operating loss of 43 million shekels, and a negative cash flow of 66 million shekels.

The railway also fell short of its goals for passenger traffic and revenues, and sustained losses from its cargo revenues as well. As a result, it missed its EBITDA goal by 62 million shekels.

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1.6702273Sun, 2 Dec 2018 00:52:32ReutersSun, 2 Dec 2018 00:52:16In a bid to kick-start hope and growth, the poorest country in Europe has found a way to lure home migrant workers and embed a small pocket of entrepreneurship in once-communist Moldova.

Be it hairdressing or nut farming, car services or internet cafes, thousands of Moldovans who had migrated West in search of opportunity have repatriated and used a pioneering grant scheme to set up small businesses.

Advocates say the scheme could be copied in sub-Saharan Africa or postwar Syria, as poor and unstable states seek new ways to coax back their brightest and best.

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“We probably don’t end all the issues of migration with this but it helps to make use of a population which could develop agriculture, or other businesses in rural areas,” said Viorel Gutu, Moldova’s former deputy minister of agriculture.

Migrants who returned launched everything from car services to hair salons, remembered Gutu, who was involved in implementing the program and now works for the United Nations Food and Agriculture Organization.

Unable to find the crucial finance he needed to expand his nascent nut-growing business, Igor Golban felt he had no option but to leave his Moldovan home and try his luck as a migrant worker.

In 2013, he swapped the orchards and vineyards of landlocked Moldova to work at a northern German farm growing sea buckthorn.

His hard work paid off. Within months, Golban returned home and invested the savings sent home in his beloved nut business.

He now earns more in Europe’s poorest country from exporting organic walnuts, hazelnuts and almonds than he did working in the region’s largest economy. He would not say how much money his operation makes, but the 37-year-old employs nine full-time workers and 14 more during the two-month harvest: “all Moldovans, all locals,” he said proudly.

Key to his success was the government grant of 10,000 euros ($11,262) that meant he could modernize his 32-hectare (79-acre) farm, Golban told the Thomson Reuters Foundation.

“The program helped very much. It helped many of those who return ... and they create new job opportunities,” he said. “A lot of the money earned abroad is returning to the Moldovan economy.”

The grant scheme had its detractors when it launched in 2010 with European Union funding and UN expertise.

It is only open to those who send money home and their immediate kin — remittances account for nearly a quarter of Moldova’s gross domestic product — and many locals resented rewarding those who left and returned to go into business.

But as the plan created jobs and enterprises to fill the economic void left by the collapse of the Soviet Union, it became a model to watch.

Known as PARE 1+1, a similar scheme is being piloted in Tajikistan, where remittances make up almost 30% of GDP. Other countries and regions may follow suit.

For the UN migration agency, such schemes are the best shot at getting people to head home and invest enough hope, money and opportunity that people stop leaving.

“If migrants do not have concrete and positive livelihoods scenarios back home after the return, very likely they would try to go back to countries of destination,” said Ghenadie Cretu, a coordinator with the UN’s International Organization for Migration in Moldova.

The EU, together with IOM, has been ramping up efforts to usher home European-bound Africans who get stuck in transit in places such as Algeria and Libya.

Cretu said the Moldovan program could be adapted for such migrant crises, and could even work in a place like Syria when post-conflict rebuilding begins.

Under PARE 1+1, migrants or their families setting up small businesses using remittances receive matching grants of up to 10,000 euros.

Since 2010, more than 1,250 businesses have benefited, more than half in food and agriculture, according to official figures. They have created about 3,200 new jobs.

Nearly a decade on, the program has approved grants totaling 249 million Moldovan leu ($14.5 million).

Still, that is only a small fraction of Moldova’s remittances each year from migrant workers. In 2017, migrants sent back $1.7 billion, according to Costin.

Successful applicants get training on how to run a business before they receive the grants and mentoring support.

“For us, the most important is that we can earn here, we earn well, we can set up good working conditions for locals,” said Golban.

Bondholders of Matomy Media Group are weighing turning to the courts for immediate repayment of the 103 million shekels ($27.8 million) in debt unless the digital-advertising firm raises new equity capital. “If a fundraising is completing over the next month, we will drop our demand for immediate repayment,” one bondholder, speaking on condition of anonymity, told TheMarker. The company’s board, however, has not yet discussed raising capital. Shareholders have said they don’t expect it to exceed $15 million, half of what bondholders are demanding. Bondholders who spoke to TheMarker after a company presentation Wednesday said they were angry and confused over management’s plans. Bondholder concerns arose after Matomy said last Friday it wanted to revise the terms of the debt and to delay an agreement to buy out minority shareholders in its Team Internet unit by November 30. Matomy shares ended 7.4% lower at 30 agorot. (Shelly Appelberg)

Two top fashion chains post quarterly losses

Red was the color this season for two of Israel’s biggest fashion retailers, sending their shares tumbling. The Castro group turned in a 74 million shekel ($19.9 million) loss for the third quarter, most of it due to a one-time charge of 60 million shekels related to its purchase of the Hoodies group. Even without that, Castro posted a 13.7 million operating loss on weak sales and store closings. Castro shares ended down 2.6% at 91.19 shekels. Meanwhile, Golf reported a 2 million shekel loss for the quarter, widening from 1.4 million a year earlier. Its Adika and Golf & Company units were both profitable, but its core apparel business lost money. Thanks to Adika, sales for Golf were up about 5% to 223.7 million. Sales for its core clothing business were virtually unchanged at 80.5 million. Golf shares finished down 6.8% at 3.49 shekels. (Eran Azran)

Delek profit doubled in third quarter

Delek Group said Thursday it more than doubled third-quarter profit, boosted by record sales of natural gas. Delek earned 323 million shekels ($87 million), up from 151 million shekels a year earlier, which excluded the sale of part of its stake in the Tamar offshore gas field. Last year, subsidiary Delek Drilling recorded a one-time profit of $567 million from the sale of a 9.25% stake in Tamar, Israel’s main source of natural gas. Including that one-off gain, Delek’s profit in the third quarter of 2017 was 1.02 billion shekels. Delek said it hoped to sell its remaining 22% stake in Tamar next year by selling the shares on a foreign stock exchange. Revenue rose to 2.3 billion shekels from 1.8 billion, lifted by higher sales at Tamar and at its North Sea unit. Tamar’s gas sales hit a new quarterly record of 2.8 billion cubic meters in the quarter. Delek shares ended up 0.9% at 658.60 shekels. (Reuters)

Wall Street pressures Tel Aviv shares lower

Tel Aviv shares ended three days of gains as a lower Wall Street pressured prices lower. The benchmark TA-35 index dropped 0.4% to close at 1,629.94 points, while the TA-125 fell 0.3% to 1,468.56, on heavy turnover of 2.1 billion shekels ($570 million). The day was characterized by a raft of earnings reports. Ham-Let fell 7.7% to 78.88 shekels after it said its third-quarter net dropped 20% to $3.2 million. Property developer Summit gained 3.1% to 32.99 on a 15% increase in net operating income to 84 million shekels. Insurer Phoenix edged 0.2% higher to 22.45 after it boosted profit to 308 million from 187 million a year earlier. Kenon Holdings rose 1% to 62.90 after it declared a dividend of $1.86 a share, or a combined $100 million. Among blue chips, Israel Chemicals dropped 2.8% to 21.74. In foreign currency trading, the dollar resumed its decline, weakening more than 0.6% to a representative rate of 3.71 shekels. (TheMarker Staff)

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1.6701136Fri, 30 Nov 2018 03:31:21Irad Atzmon Schmayer Fri, 30 Nov 2018 02:10:06“I long for the day I can start eating meat again,” confesses Ido Savir. To be exact, he does taste meat from time to time, but no animal is harmed in its production.

Savir, a conscientious vegan for the last 20 years, is the CEO and founder of Supermeat, one of the only start-ups in Israel or the world that’s developing cultured chicken meat for human consumption. Two years ago, his company took a different direction than most Israeli high-tech companies do, embarking on a crowdfunding campaign.

“It was important for us to get a sense of how the public would respond to a product like this. Not through a survey, but in a wider context,” relates Savir. “One of the rewards for participating in the survey was a coupon for the product, an early order to be delivered five years hence. This enabled us to conduct the most faithful survey one could get. The aim was to raise $100,000. Everyone said there was no chance we’d succeed and that we should aim for $50,000 in order to reach our target.”

In the end, Supermeat raised $250,000, with the support of 5,000 people. “Responses on social media were very favorable – I couldn’t believe it,” says Savir.

Support for initiatives such as Supermeat derives, among other things, from a bitter truth which has become apparent to the industrialized world over the last few decades: Eating meat is disastrous, both morally and from an environmental perspective.

According to UN figures, the meat and milk industries emits toxic gases that are equivalent to 7.1 billion tons of carbon dioxide a year – comprising 14.5% of all manmade polluting emissions. Sixty percent of these are a by-product of raising and slaughtering cows.

Furthermore, unbearable suffering is inflicted on animals during the entire process. According to the UN’s Food and Agriculture Organization, 44.5 billion chickens, half a billion sheep and 280 million cows are slaughtered annually to meet the world’s appetite for meat. The world’s population is expected to rise to 10 billion by 2050, and this appetite is expected to grow in tandem.

'High steaks'

Despite horrific pictures from slaughterhouses and the efforts of avid vegetarian and vegan activists, as well as articles describing the precise costs involved in producing one kilogram (2.2 pounds) of meat, the global consumption of meat is on the rise.

According to UN and OECD figures, in the year 2025 the average person will consume 35.3 kilograms of meat, 1.3 kilograms more than in 2010. This is despite the fact that the number of vegetarians and vegans is constantly growing.

In order to find our way to a world without meat we must raise the supply of alternate sources of protein, instead of restricting the variety of foods that people consume. In order to break into the global meat market, valued at $1 trillion, there are people in Israel who are working on technologies to expand our menus and reduce animal suffering.

Several local initiatives are promoting the next generation of Israeli food-tech. There are 311 local companies active in this area. Two months ago, the Innovation Authority announced its support, amounting to 100 million shekels ($27 million) spread over eight years, for a food-tech incubator near Safed. “In addition, we’re supporting another incubator in Ashdod, called The Kitchen, in collaboration with the Strauss Group,” says Ofra Lotan, who is one of the authority’s consultants and examiners.

Even though the Innovation Authority supports food-tech entrepreneurs from the first stages of research and development, through the incubator stage and up to the mature stage, says Lotan, it does not help in matters relating to regulation. It does give grants to support the licensing stages, though. She emphasizes that Israeli food-tech companies also benefit from investments through other innovation channels.

“For example, cultured meat for consumption is based on stem cell technology, which is also supported by the authority.” Lotan adds that the physical proximity of knowledge centers gives a relative advantage to this industry. According to the authority, 30 million shekels were allocated to food-tech initiatives over the last two years.

One of the prominent entrepreneurs in this area, one who is trying to make the Upper Galilee a central food-tech hub, is former Knesset member Erel Margalit, the CEO of the Jerusalem Venture Partners venture capital fund and the head of the National Initiative organization. He spearheaded a government initiative to develop Israel’s outlying areas and to attract international food companies here. According to the plan, says Margalit,

“If such a company wants to set up a development center in the Galilee, the state will finance 40% of employee salaries, up to $10,000 a month. Moreover, the state will grant free land for building such centers and will subsidize 90% of the cost of building them.”

“This is going to be a big area, but it will take years to develop. Not everything that is intellectually interesting or is good for the world can turn into a big company. Venture capital funds must work together with the scientific community and with universities to put Israel on the map,” adds Margalit.

'Proof of concept'

Five years ago, Prof. Mark Post from Maastricht University produced the first cultured meat patty, a $300,000 proof-of-concept venture showing that producing meat for consumption was feasible under laboratory conditions. In brief, cultured meat is based on stem cells which can differentiate into different cell types: fat, muscle, bone, etc.

A sample of muscle cells is taken from an animal, becoming a “bank” of cells that is kept in frozen liquid nitrogen, from which meat can be continuously produced.

Some of these cells are seeded in a large vat that contains a liquid that includes all the ingredients required for cell proliferation: sugars, fats, proteins. The stem cells grow and proliferate up to the required mass, after which they can be turned into the muscle and fat tissue that make up meat.

Can this product be called meat? According to Supermeat’s CEO there is no question that it can. “Ultimately, it’s the same raw products,” explains Savir, who’s been asked this question countless times. “Anyone who’s allergic to meat will also be allergic to this product. It’s like asking if ice that’s made in a freezer and not on an iceberg can still be called ice. Under a microscope, the two [meat] products are biologically identical.”

In the common workspace in the Rehovot lab, which smells sterilized and looks like a hospital ward, there is another start-up down the hall working on producing the meat of the future. Before setting up Aleph Farms, Didier Toubia worked for 20 years as a biotechnology researcher at the Volcani Agriculture Institute. From there he moved into a medical area, managing IceCure Medical and an orthopedic start-up called NLT, which was sold in 2016.

“I then decided to return to the food industry. I believe life is short and that it’s best to devote it to benefiting mankind. I realized that in order to make a real difference, the most suitable place is food. As an observant Jew, I see more and more religious leaders coming out against the eating of meat,” he says.

When it was set up in 2017, Aleph Farms acquired a permit from the Israel Institute of Technology to use technology developed there previously for rehabilitative medicine.

“They knew how to isolate cells from a human patient who has undergone a heart attack, to grow cardiac tissue from these cells and to transplant it back, like a patch. The tissue is reabsorbed by the original organ, with the aim of recovering cardiac function,” explains Toubia. “We take the ability of the tissue to grow in a completely different direction.” The Strauss Group partnered in setting up the company, now supporting Aleph Farms as part of the incubator it manages. Since its inception, Aleph Farms has raised $2.4 million.

“There are two approaches to producing protein from living tissue,” says Toubia. “One says – let’s eat less meat and more protein from other sources, such as insects or plants. I think this approach is valid, but 90% of the world’s population still consumes meat. Meat substitutes have remained marginal. Meat consumption continues to grow by a few percentage points a year.

Even if vegetarians reach 20% of the population, this won’t solve the problem,” he argues. “According to the Paris Agreement, in order to prevent a two-degree rise in the earth’s temperature, on average, the amount of beef we eat must be reduced by 75%, with pork consumption dropping by 95%.

We say that instead of giving people something else to eat, such as grasshoppers or lentils, let them eat meat – we’ll solve the problems associated with it.”

'A bug and fries?'

In addition to cultured meat, there is another source of protein that will soon be available for consumption in Israel. This source lies in insects.

Currently, two billion people around the world (equal to the number of people who own smartphones) are entomophagous, namely, insect-eaters. Throughout history, humans ate a wide variety of arthropods, starting with the ancient Greeks who ate cicadas and up to modern-day Korea, where one can eat the pupae of silkworms. Jewish communities in Yemen and Tunisia used to eat locusts.

Thus, in some ways the Israeli start-up Hargol (grasshopper in Hebrew) is trying to revive old customs, introducing locusts to Israeli menus. Dror Tamir, founder and CEO of this company, vouches that “the locust is the best source of protein in nature. It contains 70% protein, many amino acids and Omega-3, but is low in saturated fats and cholesterol. They have a very mild taste.” He adds that locusts are one of the most suitable creatures for intensive farming.

“Ultimately, we’re looking for something that can be grown in high densities. Producing a kilogram of beef requires 2,000 liters of water, while a kilogram of locust meat requires only two liters. Locusts also reduce the emission of greenhouse gases by 98.8%, and the area required to raise them is much smaller. The process produces almost no waste.”

Hargol’s CEO says that he and his deputy of operations Ben Friedman had been collaborating on some other project. The new venture was propelled forward when the two met Hanan Aviv, Hargol’s technologist. “When I met him, he was already raising locusts for food, making burgers. He believes that insects are the future of the human race. This link with him gave us our big push forward.”

Hargol’s first farm is in the community of Elifelet, not far from Rosh Pina in the Galilee, says Tamir. “The next one will be on the Golan Heights, with a third one planned for the north as well.” He says that Hargol is placing the locust farms in abandoned chicken coops, thereby contributing to the environment. “We want to create new industries in the periphery. We stress this in our contacts with the state, which has yet to contribute a single shekel.”

On the face of it, you couldn’t guess what the powder made by Flying SpArk is made of. It looks like white flour. This is another Israeli startup that’s managed to weave gold from insects, turning fly larvae into powder.

“It takes only seven days from the time the fly lays eggs until we take the larvae,” explains Gronich. “The larva increases its size 250-fold. With our technology, in which we raise larvae on small trays, in towers with very narrow spaces, we can obtain 400 kilograms per square meter per month.” Gronich says they’re a year away from introducing their product to the market. “This will be the cheapest animal protein on the market,” he asserts.

With that, Gronich adds that for reasons of kashrut they will not be selling their product in Israel, but in places where insects are consumed, such as the Far East and South America. “We’ve discovered that in Nordic countries it’s not a problem either,” he says.

And what does it taste like? “Reactions are very positive. It’s as if you asked me about flour – it has no taste. You can make bread from it, or crackers and croissants. It’s the same, you put it in various other products.”

Which will win, cultured meat or insects? “It depends on how the market responds over the next few years,” figures Supermeat’s CEO Savir. “We’re all into alternate sources of protein. When we talk to companies producing meat, they often say they’re not meat producers but protein producers. In many cases, this won’t be a zero-sum game, but an all-inclusive one.”

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1.6701134Fri, 30 Nov 2018 02:45:36Ora Coren וReutersFri, 30 Nov 2018 02:09:58Gasoline prices will drop of 47 agorot (about 13 cents) a liter starting on Sunday, following a sharp decline in global petroleum prices, which is being partly offset by a strengthening of the dollar against the shekel.

The Energy Ministry said on Thursday that after midnight on Saturday night, the price for 95 octane gasoline at self-service pumps cannot exceed 6.01 shekels a liter, including value-added tax. The added cost for full-service pumps remains 21 agorot, unchanged from the previous month, it said.

In Eilat, where there is no VAT, self-service 95 octane gas goes down to 5.13 shekels a liter, a drop of 41 agorot. Gas at full-service pumps will cost an additional 18 agorot.

World oil prices were set on Thursday for their biggest one-month fall since the financial crisis in 2008, having lost about 22% in November.The reason is a rise in crude supply from the U.S., together with Saudi Arabia’s insistence that it will not cut output on its own to stabilize the market.

OpenLegacy, an Israeli-U.S. startup whose software helps companies create digital services from older systems, said Wednesday it raised $30 million in a funding round led by Silverhorn Investment Advisors. Other participants included CommerzVentures, the venture capital unit of Germany’s Commerzbank; C. Entrepreneurs, a venture fund controlled by BNP Paribas Cardif with Cathay Innovation; Israel’s Leumi Partners; O.G. Tech Ventures, Prytek-GFS Group and RDC, a joint venture between the arms makers Elbit System and Rafael. OpenLegacy said $27 million of the proceeds would go into the company, including hiring 60 employees to join its workforce of 85. Sources estimated that the fundraiser was done at a $100 million valuation for the company, which began enjoying positive cash flow this year for the first time. The company automates the process of integrating older (legacy) computer systems quickly and without changing the underlying systems. Founded in 2013, it has raised $37 million to date. (Irad Atzmon Schmayer)

Mexichem launching innovation hub in Israel

Mexican industrial group Mexichem is establishing an innovation hub in Israel, building on this year’s acquisition of Israeli drip irrigation pioneer Netafim. The company has a team scouting for technology and startups that fit Mexichem’s main businesses: building and infrastructure, agriculture and data communications and basic materials, CEO Daniel Martinez-Valle said. The hub will also help develop new business models for the company’s customers and examine investment opportunities for Mexichem’s new corporate venture capital fund. “Israel will be a significant source of deals,” Martinez-Valle told Reuters Wednesday during a trip to Israel. He declined to provide financial details but said this would be a significant investment priority for the next five years, adding: “Israel is the priority for building innovation.” In February, Mexichem acquired 80%of Netafim, the world’s largest provider of drip irrigation systems, for $1.5 billion in cash and debt. The rest is held by Kibbutz Hatzerim. (Reuters)

About to be acquired by IBM, Red Hat is buying Israeli startup NooBaa

It’s about to be acquired for $34 billion by IBM, but that didn’t stop open source software company Red Hat from undertaking its own acquisitions. The company announced Wednesday it was buying NooBaa, a Tel Aviv startup developing software that enables businesses to manage their data more easily and access their various data providers. The price was not provided for the transaction, but Red Hat said Noobaa’s software will become part of its open source portfolio. “NooBaa’s technologies will augment our portfolio and strengthen our ability to meet the needs of developers in today’s hybrid and multicloud world. We are thrilled to welcome a technical team of nine to the Red Hat family,” said Ranga Rangachari, a Red Hat vice president. Noobaa was founded in 2013 and raised an undisclosed amount of capital from Israeli funds Jerusalem Venture Partners and Our Crowd as well as a strategic investment from Akamai Capital. (Irad Atzmon Schmayer)

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1.6699843Thu, 29 Nov 2018 12:54:54Yael Darel Thu, 29 Nov 2018 12:54:05People buying and renovating homes in Israel will no longer be able to pay in cash starting January 1, as Israel cracks down on the black market and tax evasion that has characterized much of the real estate market.

The ban on cash payments is part of legislation passed last March by the Knesset to pare back the use of cash throughout the economy. It sets a ceiling of 11,000 shekels ($2,950 at the current exchange rate), or 10% of the total price in the case of real estate (which is lower), on transactions that can be paid in cash. Buyers will have to disclose the source of their funds.

“That meaning of the law is that cash can no longer be used in real estate transactions, even if you’re talking about a payment connected with a memorandum of understanding or a payment upon signing the contract,” said Shay Aharonovich, senior deputy director for land taxation at the Israel Tax Authority.

He warned the violators could be subject to fines, although not immediately after the law goes into effect in order to let people adjust to the new regime.

>> Only the wealthy can afford an apartment in Tel Aviv — but is that such a terrible thing? | Analysis

Speaking at a conference of land assessors in Eilat on Wednesday, Aharonovitch said the reporting requirement on source of funds would not have to be filed with the tax authority at the time of the purchase.

“We understand that many time at the time the sales contract is signed, home buyers don’t know how they will be paying for the property up to the last shekel. Therefore, we have set up an online reporting system and home buyers will only have to report within six months on their sources of financing. If they don’t report, we’ll impose a fine,” he said.

Regarding renovations, Aharonovitch said homeowners who cannot show a receipt for the work will be required to show where the money came from. Without such proof, the Tax Authority will deem the payment as having been made in cash and impose a fine.

“That is a violation not only for the contractor that got the money but also for the customer,” he warned.

The 11,000 shekel ceiling doesn’t apply to non-business transactions, for example money transferred between two friends, which will be limited to a much higher 50,000 shekels. Payments between family members or to government authorities will be exempt.

Unregulated free-loan societies (gemachim) that are widely used by ultra-Orthodox Jews will still be permitted to make loans in cash in the same way regulated financial institutions are permitted. Gemachim were exempted at the urging of MK Moshe Gafni (United Torah Judaism), chairman of the Knesset Finance Committee.

InterCure, an Israeli medical marijuana company chaired by former Prime Minister Ehud Barak, has completed a private placement from investors including WeWork founder Adam Neumann, the company said Wednesday. The $17 million fundraiser, which is being conducted ahead of plans to list InterCure on the Nasdaq, included U.S. billionaire Gary Fegel through his GMF capital fund and InterCure controlling shareholder Alex Rabinovich. Fegel made his fortune as a senior partner at Gelncore before leaving the company in 2013. The funds will be used to develop InterCure’s business overseas and the costs connected with its planned dual-listing. Once an investment company with no assets, Intercure bought Canndoc, one of eight authorized growers of medical marijuana in Israel, in September. It aims to become an exporter when the Israeli government authorizes exports. InterCure shares finished up 6.1% at 5.26 shekels ($1.41). (Guy Erez)

Teva to recall some versions of blood pressure drug due to impurities

Teva Pharmaceuticals is recalling certain combinations of blood pressure drug valsartan in the United States following the detection of a probable cancer-causing impurity, the latest global recall of the medicine. The Israeli drug maker will recall all lots of amlodipine-valsartan and amlodipine-valsartan-hydrochlorothiazide combination tablets due to an impurity in an ingredient made by an India-based unit of Mylan, the U.S. Food and Drug Administration said on Tuesday. The European Union last week effectively banned sales of valsartan made by the Mylan India unit after some batches were found to contain the same impurity, N-nitrosodiethylamine. Teva has not received any reports of adverse events signaling a potential link or exposure to valsartan, the health regulator said. Patients are advised to continue taking their medication as the risk of harm may be higher if the treatment is stopped immediately without any alternative treatment, the FDA said. Teva shares ended unchanged at 80.60 shekels ($21.60). (Reuters)

Co-Op wins 45-day stay of proceedings

The Co-Op Israel Cooperative Society and Co-Op Shop supermarket chain won a 45-day stay of proceedings from creditors Wednesday. The chain had sought 90 days, but Jerusalem District Court Judge Alexander Ron declined to give it more than an initial 45 days and appointed two trustees to administer the company. The chain, which is owned by its 13,000 members, said its assets of some 250 million shekels ($67.3 million) exceeded its debts by about 50 million but it had short-term cash flow problems in part due to one-time expenses. A lawyer for Israel Discount Bank, one of Co-Op’s creditors, said the chain owned the bank more than 20 million shekels, not 8.6 million as the court filing said. The society operates nationwide 42 stores directly and another 30 through franchisees, some of which will have to be sold as part of a reorganization. (Efrat Neuman)

Financial stability panel to begin work soon

The Bank of Israel said Tuesday the committee newly approved by the Knesset to monitor the stability of the country’s financial sector would convene within months. The panel, which will be chaired by the governor of the central bank, will oversee Israel’s financial institutions, ensuring coordination among regulatory bodies as reforms have brought more companies into the sector. “The large number of players in the credit market and the division of responsibility between the various regulators requires looking at the entire system and closely coordinating the regulators,” the bank explained. The International Monetary Fund had recommended Israel establish the committee after the global financial crisis. The Bank of Israel said it would start work within days to set the agenda for the committee, which will include senior treasury and Israel Securities Authority officials. (Avi Waksman)

Insurers lead Tel Aviv shares higher

The Tel Aviv Stock Exchange extended its gain Wednesday, but the dollar weakened for the first time since the Bank of Israel announced a hike in interest rates. The benchmark TA-35 index ended up 0.7% at 1,637.10 points, while the TA-125 rose 0.8% to 1,47236, on turnover of 1.13 billion shekels ($300 million). Insurance shares paced gains, helped by the expected profit boost from the rate hike and from third-quarter earnings. Migdal rose 6.1% to 4.40 shekels after saying profit nearly quadrupled from a year ago, to 243.3 million shekels. Harel gained 4.2% to 29.31 on a 75% rise to 287 million. Builder Astrom climbed 5.1% to 16.75 after it said third-quarter net attributable to shareholders climbed 33% to 194.6 million. Bank Hapoalim raised 2 billion shekels in deposits for 6.2 years at 89 basis points over equivalent treasuries. In foreign currency trading, the dollar strengthened 0.1% to a representative rate of 3.733 shekels (Michael Rochvarger)

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1.6699221Wed, 28 Nov 2018 23:27:37Avi Waksman Wed, 28 Nov 2018 21:55:25When it comes to symbolism, Jerusalem gets the Israeli government’s attention. In the past year alone, it has lobbied for the United States to move its embassy to the capital, helped arrange to have a leg of the Giro d’Italia bicycle race held there, and unsuccessfully sought to move a high-profile soccer match between Israel and Argentina to the city.

But while the government never forgets Jerusalem when it comes to symbols, the city’s socioeconomic ranking has been falling steadily. On Wednesday, the Central Bureau of Statistics said it slid another notch to Cluster 2, the second-lowest group out of 10.

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The latest decline follows a rapid descent for Jerusalem on the CBS rankings. Two years ago it fell from fourth lowest decile to third lowest, in 2004 from fifth lowest decile to fourth lowest.

The CBS ranking is not about the city’s finances but about its residents. It measures a host of factors like average levels of education, standard of living, rate of employment, percentage of families with four or more children and percentage of elderly getting income support.

The CBS even looks at obscure data like the number of days a year residents spend on vacations or business abroad, and how much they pay on average to renew their car registration. The latter figure gives an indirect indicator of family wealth because the fee goes down with the age of the car. That, says the CBS, helps detect unreported income.

The CBS rankings, which are published every two years, have become a sort of status symbol for residents of the 255 local authorities and 982 other communities covered in the survey. Savyon, the tony Tel Aviv suburb, ranked the highest in the latest survey while the Bedouin local authority Midbar Hanegev was the lowest.

Jerusalem wasn’t the only city to see its ranking fall; seven others did as well, while 26 raised theirs. Moreover, Jerusalem’s parameters haven’t declined so much as others have improved more quickly. For instance, the city’s median income level rose since the last survey.

Status or not, for municipal officials, there is a practical incentive to push for a lower ranking. Local authorities get more government aid for things like daycare subsidies the lower their socioeconomic profile.

Tel Aviv-Jaffa, which was ranked right, has sought to get the CBS to counts its big population of asylum seekers in its survey, which would give a more accurate picture of the city’s population and entitle it to more aid. Menachem Leibe, the city’s director general, said when the last survey was released in 2016 said its eight ranking was “a serious distortion of reality.”

The CBS answered that it couldn’t gather quality data on asylum seekers and that was why it had left them out.

When Jerusalem’s ranking fell to three in 2016, the city expressed satisfaction. “Putting Jerusalem in Cluster 3 more faithfully reflects the city, as we have sought for some time, and will enable us to get bigger budgets for Jerusalem and improve distributive justice,” it said.

This week, however, the city was less happy with its downgrade, saying the index contained “serious distortions” and “even partial data from 2015.”

It said programs by the city has led to a decline in unemployment and poverty and a rise in the labor force participation rate, including in the high-tech industry. Fewer young families are leaving the city and money has been invested in infrastructure and public translation.

“Mayor [Nir] Barkat has an uncompromising campaign with the Finance Ministry to increase budgets to Jerusalem to maintain these positive trends,” a city spokesman said. “Unfortunately, the writing has been on the wall for years, and the treasury… has never presented a strategic plan for the capital. Increasing the budget to the capital is a national interest of the highest importance.”

The trip will also include a meeting with Prime Minister Benjamin Netanyahu on Wednesday.

Britain is seeking to replicate existing free trade agreements it enjoys through its membership in the European Union and EU preferential arrangements with third countries like Israel as it gets ready to leave the bloc, including the EU-Israel Association Agreement.

“Ensuring continuity for our businesses is the best foundation for growing two-way U.K.-Israel trade and investment. The complementary nature of our economies in areas like science and technology ... gives us an obvious opportunity,” Fox said in a statement ahead of the visit.

Britain’s Department for International Trade said goods worth $9 billion were traded between Britain and Israel in 2017.

Prime Minister Theresa May secured agreement with the EU Sunday for a deal that will see Britain leaving the bloc with continued close trade ties, but the odds now look stacked against her getting it approved by a deeply divided British parliament.

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1.6697187Wed, 28 Nov 2018 01:56:46Eran Azran וMichael RochvargerWed, 28 Nov 2018 01:56:34A day after the Bank of Israel took everyone by surprise with its first interest rate hike in more than seven years, businesses and the financial markets were asking whether this was the beginning of a trend or a one-time step.

Banking and insurance shares, which rallied on the news Monday, continued higher on expectations that the higher rates would strongly boost their bottom lines. In the housing market, sources said the move would cool demand, and some denounced it as populist.

Economists were largely praising the decision by the Bank of Israel’s monetary committee to raise its base lending rate, effective Thursday, to 0.25% from the 0.1% record low in effect since 2015. The move was particularly unexpected because it was taken before incoming governor Amir Yaron takes office on December 24.

“In deciding to raise rates the monetary committee demonstrated impressive independence and (correctly) gave greater weight to the macro environment, where a zero interest rate is no longer appropriate, and lesser weight to personnel changes and the change of governors,” said Rafi Gozlan, chief economist at IBI Investment House.

He added that even with a higher lending rate and the base rate likely to rise at least to 1% by the end of next year, monetary policy remains expansionary.

Yossi Fraiman of Prico Risk Management said he expected further rate rises to be very gradual, noting that falling world oil prices would contain Israeli inflation.

“An increase in the shekel interest rate at a time when the United States has signaled it will slow down its rate of rate rises shows there’s potential to continue narrowing the interest rate differential between the shekel and the dollar, a trend that will contribute to the shekel’s strength and hurt the terms of trade for Israeli exporters,” he said.

The dollar and euro continued to weaken Tuesday. The greenback edged down to a representative rate of 3.7280 shekels from 3.737 before the rate hike. The euro lost 0.4% to 4.2191 versus 4.2495. Bond prices continued to slide, with the Tel Aviv Stock Exchange’s Tel-Bond 20 index closing 0.5% lower and the Tel-Bond 60 off 0.4%. Stocks moderately extended gains following sharp rises Monday.

Financial shares rose strongly on Monday on the rate news, with the TA-Banking index up 3% and the TA-Insurance-Plus index up 3.4%.

For Israel’s insurance companies, higher rates will let them reduce provisions they have to make due to the super-low interest rate environment. Banks will enjoy wider interest rate spreads between what they pay out to depositors and what they collect from borrowers.

“The current [rate] rise is very important in terms of contributing to bank profits and, of course, leads to an improvement in financial margins. The impact of the current rise we’ll see as soon as the coming quarter,” Dorin Zelnir-Palas, head of research at IBI, told TheMarker.

In the real estate market, the rate rise was greeted with less joy.

“Raising the interest rate was a populist maneuver by the acting governor, who wants to be remembered,” said Yehuda Katav, chairman of the Association of Contractors and Builders in Tel Aviv-Jaffa, referring to Nadine Baudot-Trajtenberg, the deputy governor who is heading the bank in the interim.

While Katav said he doubted that the Bank of Israel would raise rates again for the foreseeable future, this week’s move would put a chill over the real estate market by edging mortgage rates up.

Eran Carmel, chief executive of EWM Financing Solutions, said that under current regulations, a couple earning a combined 18,000 shekels ($4,830) a month and buying their first home now face a ceiling on monthly repayments of 5,940 shekels on a 1.3-million-shekel, 30-year-loan.

“An increase of 0.25 percentage point for a mortgage will reduce the maximum allowable mortgage that the couple can get by 100,000 shekels,” he said. “We expect to see a drop in the number of sales.”

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1.6697420Wed, 28 Nov 2018 01:47:49Avi Waksman Wed, 28 Nov 2018 01:47:43“We believed that conditions were ripe.” Those were the words Acting Bank of Israel Governor Nadine Baudot-Trajtenberg used Monday to explain the central bank’s decision to raise its key lending rate to 0.25% from 0.1% after three years and nine months of no change.

Baudot-Trajtenberg acknowledged that the conditions required to raise interest rates have been in place for some time, but as she explained it, the monetary policy was to be sure those conditions were stable. By stable conditions, it meant that inflation will remain inside the government’s target range of 1% to 3% a year.

Keeping inflation inside the range is the central bank’s main policy goal. For the better part of a year, the bank has been saying its policy sought “to entrench the inflation environment within the target range” The fact that it didn’t repeat the phrase suggests that it now believes it has achieved that goal.

On what basis? The only risk the monetary committee pointed to was an exceptional appreciation of the shekel, which would lower the price of imported goods. But against that, there is the fact that unemployment is low, wages are rising and the government is running an expansionary fiscal policy.

All that, of course, has been true for several months and the bank didn’t act. Why now? Baudot-Trajtenberg said inflation was within the range, but still very low. “We believed we needed to be confident that inflation had really returned and had stabilized within the target range.”

Inflation has been in the target range, but it is has trended slightly down since August, from an annual 1.4% to 1.2%. But from Baudot-Trajtenberg’s perspective, it was enough that it stayed above 1% for an extended period.

Perhaps even more important, the monetary committee was looking at other measures of inflation besides the headline consumer price index.

One of those is the CPI taking out prices for energy and fresh fruits and vegetables as well as price reductions ordered by the government. Energy prices are set beyond Israel’s borders, in the global market, and are not affected by local factors. Fresh produce prices are volatile and seasonal and create CPI noise. Government intervention in prices, such as the housing market, also operates outside market dynamics.

That measure of inflation has moderated from an annual rise last June of 1.1%, heading lower to 0.8% in the next two months and then moving back up to the bottom end of the target as of October. It’s hard to see how that shows inflation has become entrenched in the range.

Another way the Bank of Israel looks at inflation is to separate tradable from untradable goods. Tradables are things that are imported or could be made locally as an import substitutes, like clothing and cars; untradables are things like property and internet connections or pedicures that can only be provided domestically.

Untradables account for nearly two-thirds of the CPI, and they have risen steadily in recent years at a rate of 1.3% to 1.9% annually. In October they rose 1.6%. Prices of tradables, on the other hand, have been falling. In April 2016, they were down an annual 3.6% and only showed a small rise in June, and by October they were up 0.5%.

But the only reason prices for tradables were rising was because of oil, while that of other tradable goods declined. Here, too, it’s hard to make a case for inflation entrenching itself.

Another way of looking at inflation is to see what inflation expectations are for the next 12 months. Although these have hovered at about 1%, they have also been trending lower. Among the economic forecasters polled by the Bank of Israel, the average fell from 1.1% in early October to 1.05% November 22. In the bond market, the imputed forecast CPI dropped from 1.31% to 1.05%

That is not a dramatic fall, but is it fair to call it entrenchment? Some economists, like Jonathan Katz of Leader Capital Markets, say yes; others are doubtful.

Katz correctly predicted a rate rise this week, but many other economists were sure the bank would hold off, if for no other reason than that the recent figures on economic growth have been disappointing. Ten days earlier, the Central Bureau of Statistics released a preliminary estimate of third-quarter gross domestic product that showed annualized growth of just 2.3%. Earlier quarters were revised downward.

Baudot-Trajtenberg acknowledged that. “The last two quarters registered moderate growth, even very moderate.” Nevertheless, she said that “according to more up-to-date indicators, we believe economic growth is continuing handsomely.”

Those indicators are the Bank of Israel’s S index, which showed a strong 0.3% rise in October. The problem is that the index is a composite of different parameters that don’t come in all the same time, this it is constantly being raised, sometime considerably.

The one economic parameter that has moved a lot over the weeks between the last rate decision and the previous one is the exchange rate. The shekel lost 3.6% in terms of the nominal effective exchange rate and by 3.2% against the dollar. The shekel’s weakness certainly contributed to the monetary committee’s decision.

But that may be what left so many economists dumbfounded. “Apart from the depreciation,” concluded Alex Zabezhinsky, chief economist at Meitav Dash Investments, “there’s been no change in the data justifying an increase in the interest rate, certainly not at this time.”

Israel Post is looking to collaborate with local startups to develop new services in areas including retailing, e-commerce, financial technology and blockchain. The postal service is due to publish a call for proposals, offering access to its database — including data on its struggles to keep up with the surge of online buying. “Israel Post and its expert teams will let the selected companies conduct pilots and demonstrate their abilities in large-scale systems like the postal service,” it said. The program is part of a government project that allows some 20 state-owned companies to take equity stakes in startups. Israel Post has the right to invest up to 45 million shekels ($12 million), but in practice the ceiling will be no more than 10 million. (Amitai Ziv)

An Israeli development team working at Amazon’s Annapurna Labs unit has developed a groundbreaking processor used to power giant server farms. Amazon Web Services, the unit of the giant online retailer that provides cloud computing services, unveiled the AWS Graviton Processor at a Las Vegas conference Monday night. Using technology developed by ARM, the new processor could cut the costs for applications like web servers by 45% versus alternatives, said Peter DeSantis, AWS’s vice president of global infrastructure and customer support. Amazon bought Annapurna, which was founded by Avigdor Willenz, in 2015 for $360 million and turned it into AWS’ chip-development group. The company, once based in Yokne’am, is now in Haifa and Hod Hasharon, with a research and development team in the United States. Amazon has other R&D operations in Israel working in areas like voice search, computer vision and artificial intelligence. (Sagi Cohen)

South Korea to buy Israeli radar system

South Korea plans to buy two Israeli early warning radar systems, as it reinforces air defenses against North Korea despite fast-improving relations. The decision to adopt the two Green Pine Block C radar systems, built by Elta Systems, a subsidiary of state-owned Israel Aerospace Industries, was made by a defense acquisition committee, Seoul’s DAPA arms procurement agency said Tuesday, without specifying the value of the order. An official at the Defense Ministry put it at 330 billion won ($292 million), saying the systems would be deployed in the early 2020s. The project is intended to boost South Korea’s capabilities to “detect and track ballistic missiles from a long distance at an early stage,” DAPA said in a statement. It did not mention North Korea, but South Korea said in December it would buy additional early warning radars after North Korea successfully tested an intercontinental ballistic missile and declared completion of the “state nuclear force.” (Reuters)

Two medical marijuana companies are due to start trading on the Tel Aviv Stock Exchange by merging with existing public companies rather than in the wake of an initial public offering. Herodium Investments said Tuesday it had signed a memorandum of understanding under which the medical cannabis operations of Panaxia Pharmaceutical Industries will be merged into the company. The all-share deal would leave Panaxia shareholders with 85% of the merged company. In a separate announcement, the TASE-traded shell company Whitesmoke Software said it was buying Better, a grower and supplier of medical marijuana, by allocating 80% of its shares to Better shareholders. Panaxia is unusual among TASE-traded marijuana companies in that it doesn’t grow the plant but makes oils and chewable tablets containing cannabis. Better is one of eight authorized suppliers in Israel of medical marijuana, with a 10,000-square-meter farm serving 5,000 patients. Herodium shares powered higher by 135%% to end at 2.70 shekels (72 cents). Whitesmoke rose 33% to 36 agorot. (Guy Erez)

Avi Nissenkorn, the chairman of the Histadrut labor federation, threatened Tuesday to call a strike at the Tel Aviv Stock Exchange unless CEO Ittai Ben-Zeev agrees to negotiations with the bourse’s shop committee. “So long as management continues to act irresponsibly and ignore the workers’ representatives, we will have no choice but to act on the labor dispute [that’s been declared] to the point of striking,” Nissenkorn said in a sharply worded letter to Ben-Zeev. Angry that the union declared a labor dispute shortly after signing a contract with TASE management in May 2017, Ben-Zeev has refused to reopen negotiations on their demands, which include a one-time bonus equal to five monthly salaries that would cost the bourse some 50 million shekels ($13.4 million). The demands come at a difficult time for the bourse, which is contending with declining trading activity and stagnant revenues, while wage costs have risen sharply. (Shelly Appelberg)

The IDB group has begun shopping its Israir airline subsidiary to potential buyers with the help of investment banks Epsilon and Giza. Controlled by Argentine property magnate Eduardo Elsztain, IDB is counting on the proceeds from the sale to help it pay down debt. Its third-quarter financial report estimated that Israir would fetch 225 million shekels ($60.2 million) and that a deal would be completed by the end of next year. Israir’s strong financial performance should make the sale easier. In contrast to its bigger rival, El Al Airlines, whose profits sagged 15% in the third quarter from a year earlier, Israir boosted its net by one-third, to $15 million, despite higher fuel and wage costs. Revenues rose 11% year on year to $144 million. Israir has benefited from increased seating capacity on its domestic flights to the southern resort town of Eilat and the fact that rival Arkia dropped its Haifa-Eilat route. (Yoram Gabison)

Drone maker Aeronautics Limited sees further deterioration in its results

Aeronautics Limited, the Israeli maker of military drones that is being investigated by police, saw a further deterioration of its financial performance in the third quarter. The company said Tuesday that its operating profit slid into a loss of $3 million, versus a profit of $6.5 million a year earlier, while sales continued to decline, by 24% to $30.5 million. Aeronautics attributed the decline to delays in completing projects on its order books and in signing new contracts. The Defense Ministry froze some of Aeronautics’ export licenses in the wake of allegations that Aeronautics representatives demonstrated a kamikaze drone in Azerbaijan by attacking a manned position of the Armenian army. The company denies the accusations. Police are meanwhile pursuing a criminal investigation as well, and 10 of its top executives face charges including fraud. Aeronautics shares, which have fallen by one-third since the start of the year, ended up 0.7% at 7.40 shekels. ($1.98). (Guy Erez)

Tel Aviv shares extend post-rate rise gains

Tel Aviv shares extended their Monday gains into Tuesday, but lost steam by early morning and closed well off their high for the day. The benchmark TA-35 index close up 0.2% at 1,625.88 points, while the TA-125 added nearly 0.15% to 1,460.89, on turnover of 1.18 billion shekels ($320 million). Gainers in the TA-125 were led by Perrigo, which climbed 3.4% to close at 233.50 shekels. Sapiens gained 3.2% to 42 and Israel Chemicals added 1.9% to 22.57. Teva Pharmaceuticals dropped 2.1% to 80.60. On Tuesday it launched its generic version of Mylan’s EpiPen at the wholesale price of $300, the same price as Mylan’s generic version of the emergency allergy shot. Elco Holdings fell 1.7% to 65.05 after reporting a 24% decline in third quarter net from a year ago to 31.5 million shekels. Other big losers were Super-Sol, which fell 2.7% to 24.13, and Gazit Globe, which lost 2.2% to 29.89. (Shelly Appelberg)

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1.6696284Tue, 27 Nov 2018 14:47:29David RosenbergTue, 27 Nov 2018 14:28:52It may be true that all the world’s a stage, but the Bank of Israel rarely gets more than a bit part in the drama.

Its governor Stanley Fischer played a heroic role in the 2008 financial crisis when the government was paralyzed by elections, and he made a little history a year later when Israel became the first country to raise its interest rate in the wake of the crisis.

But since then, the Bank of Israel has been a bore. Since 2015 the base rate has been at a record low 0.1% and its monetary committee has had so little to do that it stopped meeting every month. How often can you sit around a table of coffee and bottled water and decide not do anything?

On Monday, however, the Bank of Israel gave us some unexpected drama, not only in the arcane realm of monetary policy but even in politics. Against nearly all expectations, the committee voted to raise the base lending rate to 0.25%.

It isn't the economy, stupid

In and of itself, that sounds undramatic. It may have been the first rate change in close to four years, but it is hardly spells a major change in policy. Its immediate economic impact will be infinitesimal.

If interest rates were just about economics, then there would be little to say. But the message that the bank sent in its decision contains some unpleasant news for politicians like Prime Minister Benjamin Netanyahu and Finance Minister Moshe Kahlon, who will be facing the voters sometime between now and next November.

Politicians don’t like high interest rates or even rising ones. They spell slower economic growth, and higher borrowing costs for consumers and business. Even if rate hikes are the right prescription for the economy in the long run, long-run thinking isn’t exactly what elected officials engage in, especially if they are running for re-election.

Take Donald Trump, a man who understands very little but does know something about interest rates: He has repeatedly attacked the Fed for raising them. Trump is keenly aware that it could slow the economy just about when he is gearing up for re-election in 2020.

The Israeli economic miracle of the Bibi years – uninterrupted growth, record low unemployment and a consumer boom – has contributed in no small way to the prime minister’s popularity. But the economy is slowing and the risks of a recession are growing, and now the Bank of Israel is adding to the danger by starting to raise the cost of money.

Slapping the kids

It would be nothing more than idle speculation to guess who on the monetary committee voted for (and, assuming it wasn’t unanimous, against) the rate hike, but it is certainly fun.

Note that the Bank of Israel is between permanent governors (Karnit Flug left earlier this month and her successor Amir Yaron isn’t due to arrive until December 24). It really is odd that the committee chose this time to leap into action.

Certainly there was no urgency to act as there was, say, in 2008. The economic case for the hike, as laid out by Acting Governor Nadine Baudot-Trajtenberg, is hardly convincing. Inflation has been rising, but oil prices have collapsed and that will feed into lower prices in Israel. The Israeli economy is still growing, but the pace is trending lower. A rate hike will undermine the bank’s policy of preventing a too-strong shekel.

Rather, there’s a discreet political message in the hike, which is: Israel’s economy looks good now, but it’s being badly managed, as Flug had said many times during her term as governor. The government is spending too much and resists raising taxes. With elections on the horizon, Netanyahu’s government won’t change its bad behavior. We at the Bank of Israel are the responsible adults, and you at the Finance Ministry and Prime Minister’s Office are not.

Of course, the incoming governor Yaron could leave rates unchanged during the critical election period, and indeed that is the conventional wisdom. Chosen and carefully vetted by Netanyahu and Kahlon, it’s quite possible that they checked if he was on the same page as them on economic policy, or whether he would oppose them, as Flug did during her term.

If so, by acting now, the Bank of Israel sent a message before the new governor has a chance to send his own.

The monetary committee may even have given Yaron the room he needs to keep raising rates (if indeed that is how he feels) because he no longer carries the onus of the person who started the policy – he'd just be acting on his inheritance.

A day after the rate hike announcement neither Netanyahu nor Kahlon have commented on the rate hike, much less issued any kind of Trumpian denunciation. Perhaps they accept the conventional view that there won’t be follow-up increases in the immediate future.

It’s even possible they are simply acting responsibly by not publicly commenting on a decision made by an independent authority as the Bank of Israel is. No matter, we still don’t have a date for the next elections, but it looks like the Bank of Israel has already voted and cast a ballot against the prime minister.

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1.6695674Tue, 27 Nov 2018 10:27:26Shelly AppelbergTue, 27 Nov 2018 09:48:52Israeli-German entrepreneur Moti Ben-Moshe sought on Monday to assure investors that would complete his planned acquisition of Africa Israel Investments despite the collapse of a British energy company he owns.

“With God’s help, we will complete the Africa deal soon, and bondholders need not worry. There is nothing about this occurrence that has any connection to a [debt] arrangement of the company from its creditors,” Ben-Moshe said.

He spoke days after his Extra Energy surprised its 129,000 customers by saying it would cease providing services. The news raised questions about whether Ben-Moshe would be able to pull together the 1 billion shekels ($270 million) he needs to complete his acquisition and bailout of indebted Africa Israel, one of Israel’s largest conglomerates.

In a statement to the media from Ben-Moshe, Extra Energy is said to have reported a loss of 17 million pounds ($21.8 million) in 2017. That is on top of the 13.8 million pounds TheMarker found the company had lost the year before. In order to continue operations, Extra Energy took a loan from another Ben-Moshe, Germany and Cypriot Extra Energy companies. That debt amounted to 105 million euro ($119 million) as of last February.

Ben-Moshe said that, in contrast to his decision to write off the 500 million shekels he lost on his stake in Israel’s IDB group, he would not do the same in the U.K. “We have assets in England of about 100 million euros that we are entitled to,” he said.

He described those assets as credit given to business and household customers. Since Extra Energy has no outstanding bank or other loans, all the repayments will go to the Extra Group, he said.

Bondholders, speaking to TheMarker, said they were concerned but remained confident that the Africa deal would go through.

“Sure we’re worried, but we’re waiting to see if he raises the money and how he does it,” said one bondholder, who spoke on condition of anonymity. “His decision to abandon his U.K. activities could be good for Ben-Moshe’s activities in Israel because he will no longer have to absorb losses in Britain and can focus on his Israeli business.”

“We told British regulators that in light of significant changes in regulatory rules in England in the area of providing electric power and gas made at the end of October … the group, which operates mainly in the German market, had decided to cease its current operations on the British market,” Ben-Moshe said.

Regarding the Africa Israel acquisition, he said: “All the money that is supposed to be injected into the [debt] agreement is already in Israel. Approval by the Antitrust Authority we’ve already received and we’ve received approval from most European countries,” adding that he expected the rest to come in the next several weeks.

“I hope that we will meet the deadline we’ve set for the accord of December 13,” Ben-Moshe said.

Ben-Moshe said he had raised 300 million shekels of the 1 billion he needs and is in negotiations with parties he described as overseas banks and one Israeli institutional investors about raising the rest. He said he would name them later.

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1.6695288Tue, 27 Nov 2018 05:04:05TheMarkerMon, 26 Nov 2018 21:55:06The Bank of Israel’s surprise rate rise Monday from a low base sent shares on the Tel Aviv Stock Exchange sharply higher as financial stocks climbed. The benchmark TA-35 index finished 1.5% higher at 1,622.23 points while the TA-125 added more than 1.3% to 1,458.90 on turnover of 1.2 billion shekels ($320 million). Bond prices fell, with the Tel-Bond 20 and Tel-Bond 60 indexes both closing about 0.3% lower. Among insurers, Migdal surged 7.8% to 4.15 shekels and Clal 5.1% to 63.90. Menorah Insurance rose 5.6% to 42.04, helped by an 87% rise in third-quarter profit to 193.5 million shekels. Bank Leumi advanced 3,7% to 24.51 and Bank Hapoalim 2.8% to 25.63. Fox added nearly 1% to end at 84.49 after Leumi Capital Markets tagged the stock a Market Overweight and said the share could rise another 22%. (TheMarker Staff)

Matomy shares plummet on bankruptcy worries The collapse in Matomy shares on the Tel Aviv Stock Exchange Sunday reflects concerns that the digital advertising company faces the threat of bankruptcy. Matomy shares plunged 44% Sunday and another 4.4% Monday to close at 35 agorot (9 cents), while its bonds fell to 52.3 agorot, raising their yield to a junk level of 41%. The selling came after the company said Friday it was in talks to delay an agreement to buy out minority shareholders in its Team Internet unit by November 30 and revise the terms. The company also said it has approached Matomy bondholders about “recent developments and [to] assess the possibility of adopting agreed revisions to the terms of the bond.” Matomy also included a “flash report” of its financial results for the third quarter, which showed earnings before interest, tax, depreciation and amortization of just $2 million on revenues of $103 million. (Shelly Appelberg)

Security company G1 files for initial public offering in Tel Aviv G1, a security company once known as Hashmira, will be taken public on the Tel Aviv Stock Exchange at a valuation that could reach as much as 550 million shekels ($148 million), according to a draft prospectus filed this week. The Israeli private equity firm FIMI Opportunity Funds will be selling its 50% stake in the company in an offering of shares and warrants in the company. Once part of the global G4S security provider, G1 was sold – reportedly under pressure from the BDS movement – to FIMI last year. G1 provides security services for business and government customers. The company had revenues of 599 million shekels in the first nine months of this year, generating a net profit of 32 million. It has a policy of paying dividends equal to 50% of annual net profit. The initial public offering will be the 15th for FIMI on the TASE. (Yoram Gabison)

Co-Op supermarket chain files for stay of proceedings The Co-Op Israel Cooperative Society and Co-Op Shop supermarkets chain filed in Jerusalem District Court for a 90-day stay of proceedings against its creditors Monday. The chain, which is owned by its 13,000 members, said its assets of about 250 million shekels ($67.3 million) exceeded its debts by about 50 million but it was experiencing short-term cash-flow problems in part due to one-time expenses. Nationwide the society operates 42 stores directly and 30 through franchisees, but industry sources say they doubt Co-Op’s problems would affect competition. “They haven’t been real competitors for years,” one industry executive said. “On the contrary, they hurt competition by buying [from suppliers] at any prices and preventing prices from falling.” Judge Alexander Ron scheduled a hearing on the petition for Wednesday. Union leaders at Co-Op declared a labor dispute, which could lead to a strike in two weeks. (Efrat Neuman, Hadar Kane and Gabriela Davidovich-Weisberg)

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1.6695198Tue, 27 Nov 2018 04:40:32Sami PeretzMon, 26 Nov 2018 23:09:53The moment it became clear the Bank of Israel would have a long period between governors – more than a month between Karnit Flug’s departure and Amir Yaron’s arrival on December 24 – the question was whether the bank would try to project an image of business as usual.

In its surprise move Monday, Nadine Baudot-Trajtenberg did just that. As acting governor she presided over a meeting of the monetary policy committee that raised rates 0.15 percentage point – the first rise in more than seven years and the first change at all in nearly four years.

It’s hard to find a clear reason why rates are being raised now instead of two months ago or two months from now. There have been no dramatic developments over the past month to justify the step – unemployment remains low, economic growth has weakened a bit and inflation is completely under control.

But two bits of data convinced the monetary committee to act.

One is the increase in inflation in the middle of 2018 to inside the government’s annual target of between 1% and 3%. The rate has been below the target for several years.

The other is rising U.S. interest rates, which have weakened the shekel and saved the Bank of Israel the trouble of intervening in the market to prevent the Israeli currency from strengthening too much.

When economic-growth prospects are unclear, central bankers don’t raise rates. The fact that the Bank of Israel did so signals that it believes the economy’s outlook is bright. That’s based on strong data for the labor market – low joblessness and rising wages – pointing to continued strong demand.

Israelis are in a good situation. Not only is pay rising, but the spike in housing prices has leveled off and there don’t seem to be any clouds on the horizon at the moment. Under the circumstances, it makes sense for monetary policy to be “normalized.”

The base rate of 0.1% the Bank of Israel has preserved since 2015 was a historical low and not normal at all. It created an environment of cheap money and could have produced an asset bubble. Indeed, the soaring home prices of the past decade were in no small part due to low mortgage rates,

No one predicted that in September 2008, when the global financial crisis was gathering steam, all the world’s central banks would lower their rates to near zero and rates would stay there for years.

The U.S. Federal Reserve signaled three years ago that it was returning to normalcy by starting to raise rates to 2.125% today. In Japan and the eurozone, central bank rates are still negative, which is abnormal to say these least.

The Bank of Israel’s next rate decision in January will be taken under Yaron. He’ll have to decide whether to continue Flug’s policies and keep the base rate stable for some time or follow Baudot-Trajtenberg’s policies and preserve the rate differential between Israel and the United States.

The Apax Israel fund is in talks to buy half of Israel’s discount supermarket chain Osher Ad at a valuation of up to 1 billion shekels ($267 million). The privately held chain is known for its steep discounts and caters to the ultra-Orthodox market. It has 18 outlets in Israel and one in Brooklyn, and was founded in 2009. The chain is expected to bring in revenues of 4 billion shekels in 2018, and have a net profit of 100 million shekels. It is expected to keep on being managed by its three founders, Avraham Moshe Margalit, Aryeh Boim and Yehuda Landau. Should the sale go through, this will be Apax’s second purchase of a chain known for its low prices. Last year, Apax bought 55% of the Max Stock chain for 300 million shekels. (Guy Erez)

TASE releases fear index

The Tel Aviv Stock Exchange released its own fear index on Sunday morning, named the VTA35, which tracks the level of volatility reflected by options on shares in the Tel Aviv-35 Index. This brings Tel Aviv’s exchange in line with other major exchanges around the world, many of which have their own volatility indexes, including VIX, VSTOXX and VFTSE. The VTA35 is adapted to the characteristics of options on the Tel Aviv exchange, and will be based on the options’ implied volatility over the course of the next 30 days, in annualized terms. Standard deviations will be presented as percentages. The calculation will be based on the sell and buy prices of two call options and two put options that are nearly in the money, within 30 days of expiry. (Assa Sasson)

Shufersal Q3 profit edges up

Shufersal, Israel’s largest supermarket chain, said on Sunday that net profit rose slightly in the third quarter on record revenue as it integrated a newly purchased drugstore chain. The company posted net profit of 64 million shekels ($17 million) versus 63 million a year earlier. Revenue increased 9.4% to a record 3.3 billion shekels as same-store sales rose 3.6%. Shufersal last year agreed to buy New-Pharm Drugstores, which operates dozens of branches in Israel, for 130 million shekels. Expenses rose to 763 million shekels from 664 million due to the integration of New-Pharm and to costs associated with the launching of a new credit card as well as a rise in salary expenses. Holding firm Discount Investment Corp. in June reduced its stake in Shufersal and no longer controls the company. (Reuters)

Tel Aviv ends down, Matomy plummets 44 percent

The Tel Aviv Stock Exchange closed Sunday’s trading session with losses, as the blue-chip Tel Aviv-35 Index shed 0.6% to close at 1,598 points and the broader Tel Aviv-125 Index lost 0.5% to close at 1,440 points. Bank shares lost 1.1%. Notable shares included Matomy, which lost 44%. Its bond lost 30% on market speculation that the company is heading toward a debt settlement. Another big loser was Ability, which lost 30% after raising $10 million on Friday at a share valuation 30% under its market cap. (Assa Sasson)

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1.6681526Sun, 25 Nov 2018 22:22:45Hagai AmitSun, 25 Nov 2018 22:22:42Five years after deciding to put Israel Military Industries on the block, the state finally sold its share in the government-owned weapons manufacturer to the privately held Elbit on Sunday. This is one of the biggest deals in Israel’s weapons sector to date.

Elbit will be paying 1.8 billion ($495 million) or 1.9 billion shekels to the state.

The amount that the state will save following the sale is part of what helped the Finance Ministry officials to convince the Defense Ministry to give the deal the go-ahead.

Finance officials presented data indicating that IMI is losing an average of 250 million shekels a year, and that the state has needed to inject 5 billion shekels into the company to keep it alive over the past few decades.

Some sources familiar with the company say that in practice, the state has actually injected closer to 10 billion into IMI over the years.

Of the money Elbit is paying for IMI, only 500 million or so is expected to go into state coffers. The remainder will go to covering IMI’s obligations.

The deal was carried out a week after Avigdor Lieberman resigned as defense minister, and Prime Minister Benjamin Netanyahu took up the post. Lieberman had been hesitant to approve the deal, and delayed it, citing security considerations. Plenty of defense officials failed to understand Lieberman’s reasoning, and speculated that the deal would only go through after he left office.

Netanyahu favors privatization as a matter of principle, and pushed through the deal quickly after taking over from Lieberman.

Netanyahu is also a longtime acquaintance of Elbit controlling shareholder Michael Federmann, who, like Netanyahu, went through the Israel Defense Forces elite Sayeret Matkal unit.

The acquisition was approved last week, shortly after Lieberman’s resignation.

Elbit is slated to pay 1.4 billion shekels now, and another 400 million shekels in 2020 and 2022. The company may pay an extra 100 million shekels depending on IMI’s financial results.

The deal calls for vacating IMI’s operations at its Ramat Hasharon and Tirat Hacarmel complexes, thus enabling that land to be used to build more than 30,000 homes in high-demand areas. IMI’s operations will be moved to Ramat Beka, in Israel’s southern Negev desert.

“The synergy between the capabilities of the two companies ... will enable us to offer an enhanced portfolio and to realize the potential of the technologies of IMI in the international arena, making this acquisition significant to our long-term growth strategy,” Elbit CEO Bezhalel Machlis said.

The government announced in 2013 its intention to privatize IMI, a manufacturer of military systems best known for being an early maker of the Uzi submachine gun. Elbit was the last remaining bidder among five that had shown interest.

Defense Ministry Director General Uzi Adam noted that IMI’s acquisition by an Israeli company insured that its defense know-how would stay within the country, while improving Israel’s defense exports.

With reporting by Reuters.

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1.6682250Sun, 25 Nov 2018 21:45:09Shelly AppelbergSun, 25 Nov 2018 20:39:17A British energy company owned by Israeli-German businessman Moti Ben-Moshe collapsed over the weekend, throwing into question whether he can pull together the 1 billion shekels ($270 million) that he needs to complete his acquisition of Africa Israel, one of Israel’s largest conglomerates. U.K.-based Extra Energy announced on Wednesday that it has ceased to operate. It had 129,000 customers.

The British energy regulatory agency Ofgem said Extra Energy customers’ outstanding credit balances would be protected and there would be no disruption to supplies. As of February 2018, Extra Energy owed 105 million euros ($119 million) to Ben-Moshe's German subsidiary Extra Energie, money some fear will not be repaid - according to the two company’s financial statements.

The latest development comes after Ben-Moshe wrote off another half-billion shekels due to his failed investment in IDB Holding, Israel’s largest holding company. These two investments bring Ben-Moshe’s total losses to nearly 1 billion shekels. Prior to his IDB investment five years ago, Ben-Moshe was an unknown on Israel’s business scene.

Extra Energy began selling electricity and natural gas plans to individual and corporate customers in 2014. A push to increase competitiveness in Britain’s energy market reduced the market share of the country's six largest providers to 70% from more than 95% in recent years, with 60 smaller independent companies now in operation. But their rapid rise has led to questions over their viability, because with less capital available for long-term price hedging, some may have been vulnerable to soaring wholesale commodity price increases.

The Endole British Credit Report, a business credit research service, recently recommended companies controlled by Ben-Moshe, including the German company Extra Energie, its parent company, Extra Holdings and Extra Energy in Britain, be granted a credit line of no more than 54,000 British pounds ($69,000).

A press release issued Sunday quoted Ben-Moshe as saying that his British energy firm had had losses of 17 million British pounds ($22 million) in 2017, due mainly to marketing expenses and investments in technology such as billing systems and customer relationship management. Ben-Moshe said these systems were developed in his corporate group by Extra Energy Cyprus.

The British company transferred 30 million euros to the Cypriot company, and the German company transferred more than 70 million euros to it. That raises questions as to the financial stability of the German company, as well as questions about the massive sums being transferred to Cyprus.

Ben-Moshe tried to allay the fears of Africa Israel’s bondholders, assuring them that the German company is still financially stable, having finished 2017 with a net profit of 38 million euros. If there are no last-minute changes, on December 13, Alon Blue Square Israel, which is controlled by Ben-Moshe, is scheduled to complete a cash buyout of 56% of Africa Israel Properties for 1.3 billion shekels, plus another 130 million shekels to be paid in the future.

Another privately held Israeli company controlled by Ben-Moshe is slated to pay 340 million shekels to buy the remainder of Africa Israel’s assets — Africa Israel Residences, Danya Cebus and Africa Israel's stake in the Route 6 toll road. Africa Israel had been controlled by embattled businessman Lev Leviev.

Ben-Moshe said in response: “Moti Ben-Moshe’s subsidiary in the British energy market, Extra Energy, informed the British regulator yesterday that given the significant changes in the regulatory environment regarding electricity and natural gas suppliers as of the end of October, particularly given the regulation imposing a price cap and new rules governing competition, the group, which operates primarily in the German energy market, has decided to halt its current operations in Britain. Ben-Moshe has decided to stop subsidizing the group’s operations for the development of the British energy market and to return the license to the British regulator, Ofgem.” Five British energy companies have shut down in the past few weeks, the statement noted.

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The number of sales on international websites was up by 70 percent on Friday, and up about 40 percent on Israeli sites, compared to the Friday before, reported credit card company Leumi Card. The Azrielli website reported about 250,000 visitors, 60 percent more than on a regular day – and a 70 percent increase in the number of sales, along with a 25 percent increase in the average sales basket. Most of the sales were clothing, electrical goods and various consumer items such as toiletries and cosmetics.

At peak hours on Friday, Shva cleared about 10,000 sales a minute. Fridays are usually busy shopping days in Israel, but Black Friday was extraordinary and the heavy load caused problems, slowing down business. By mid-day, technicians managed to stabilize the system by controlling traffic.

At the same time, shoppers flooded the malls too. Azrieli Malls reported over 1 million people on Friday, three times the traffic of a normal Friday. The Gold Mall in Rishon Letzion reported 36,000 people, 30 percent more than last year, turned out on Black Friday this year. At the Mul Hayam Mall in Eilat, sales were up by 70 percent compared to a normal Friday.

The Adika website reported that traffic began building up on Tuesday night, with over 500,000 visitors over the weekend. Adika said it sold 130,000 items, a 70 percent increase over Black Friday of 2017.

The online sales rush for November began the week before with the Chinese Singles’ Day, starting on November 10. Israelis ordered about 4 million packages from Chinese websites over the two days (because of the time difference), said the Israel Post.

It is expected that after Black Friday and Cyber Monday, Israelis will set new records for purchases. Israelis have set new records for buying on the internet every year over the past five years in November. Last year, the post office reported 7 million packages arrived in Israel in November, weighing a total of 1,350 tons.

Medtronic said Nutrino’s technology will focus on diabetes, where food and nutrition are critical to effective disease management. In addition, by combining Nutrino’s algorithms to predict glycemic responses to food with continuous glucose monitoring, Medtronic said it hopes to reduce the physical and mental burden of nutrition management for people with diabetes.

“Bringing Nutrino and their nutrition-related expertise into our organization will give us a substantial differentiator in the diabetes industry and accelerate our progress to help people with diabetes live with greater freedom and better health,” said Hooman Hakami, executive vice president and president of Medtronic’s Diabetes Group.

The acquisition was the second in Israel announced in the last two months by Medtronic, which agreed in September to buy the surgical device maker Mazor Robotics for $1.6 billion. Sources at Nutrino told TheMarker that Medtronics was exploring a third Israeli acquisition.

Founded in 2011 and led by CEO Yael Glassman, Nutrino has raised $10 million and employs 25 people — 23 in Tel Aviv and two in San Francisco. Nutrino and Medtronic have cooperated on projects for two years.

Medtronic is a major player in Israeli high-tech, with three research and development centers employing 800 people. The latest acquisitions will increase its local workforce to more than 1,000.

Super-Sol shoppers will be getting 4 shekels ($1.07) off bills that exceed 25 shekels during January and February under the terms of a compromise reached to settle a class-action lawsuit. The discount will apply until Super-Sol has granted aggregate savings to shoppers of 8 million shekels. Plaintiffs had sued Israel’s biggest supermarket chain in 2015, alleging that they were repeatedly charged the full price for items that had been advertised as discounted. But since neither side to the suit could show which shoppers had been overcharged, they agreed that all shoppers would benefit using the agreed-upon formula. In addition, Super-Sol said it would create a mechanism to prevent overcharging in the future. The biggest beneficiaries from the agreement are attorneys Amir Yisraeli and Shlomi Cohen, who will get 900,000 shekels for representing shoppers in the suit. (Efrat Neuman)

Cellcom third-quarter profit plunges to 1 million shekels

Cellcom Israel, the country’s biggest cellular operator, posted just a 1 million shekel ($270,000) net profit in the third quarter. The company said on Thursday that net plunged 97% from 32 million a year earlier, while revenue slipped 6.7% to 910 million shekels. Analysts polled by Reuters had forecast on average a profit of 8.3 million shekels on revenue of 933 million. Cellcom said it reached a preliminary agreement for the Israel Infrastructure Fund to buy half the 70% stake Cellcom plans to buys in the Israel Broadband Company, which has rights to build a fire optic network over state-owned Israel Electric Corp’s power lines. Cellcom said its internet-based TV service boosted subscribers by 33.8% from a year ago to 206,000 at the end of the quarter. (Guy Erez)

Eyal Ofer seeking NIS 750 million loan to finance Mizrahi deal

His personal fortune is estimated at more than $5 billion, but Eyal Ofer is looking to borrow 750 million shekels ($201 million) to help pay the cost of buying out his cousins’ stake in Mizrahi Tefahot Bank. Ofer is avoiding the banks and seeking the loan from Israel’s biggest institutional investors as part of a strategy of maximizing the return on his holding in Mizrahi, Israel’s third largest bank. His buying a 13% stake in the bank from Liora and Doron Ofer is part of an intra-family asset swap in which his cousins will buy his stake in the mall developer Melisron. The deal will leave Eyal Ofer with 22% of Mizrahi and make him the sole Ofer shareholder in the bank. Mizrahi shares closed down 0.7% on Thursday at 66.23 shekels, giving it a market cap of 15.6 billion shekels. (Michael Rochvarger)

Tel Aviv market is a turkey as U.S. celebrates Thanksgiving

The Tel Aviv Stock Exchange got a break from Wall Street’s gyrations on Thursday as U.S. markets were closed for the Thanksgiving holiday. But neither that nor gains in Asian markets provided any relief to Tel Aviv shares: The benchmark TA-35 index ended down 0.7% at 1,607.54 points, while the TA-125 shed 0.65% to 1,447.31. Trading was a very light 878 million shekels ($235 million). Bezeq group led the declines, with B Communications dropping 7% to 34.07 shekels and Bezeq itself sliding 4.25% to 4.28. Other blue chips to fall included Israel Chemicals (down 1,.95% to 21,65) and Teva Pharmaceuticals (down 1.6% to 81.60). Brack Capital eked out an 0.2% rise to 378.70 despite turning in a 25% drop in the third quarter to 11.8 million euros ($13.5 million). Adgar led TA-125 gainers on a 2.5% rise to 6.02. In foreign currency trading, the dollar weakened 0.4% to a representative rate of 3.728 shekels. (Eran Azran)

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1.6679167Thu, 22 Nov 2018 19:24:02Meirav ArlosoroffThu, 22 Nov 2018 19:23:37At the international airport serving the Nigerian capital of Lagos – a city of as many as 25 million people – there are just three passport control officers on hand when we land. As we wait on line, one makes a motion to show that he’s hungry and asks if we have anything to give him. Not wanting to pay him a bribe to enter the country, we answer, “We are the guests of former president of Nigeria Olusegon Obasanjo.”

The mention of his name is enough to end the discussion and our passports are stamped accordingly.

Africa is every bit as despairing as it is exhilarating. In population, it is the youngest of the world’s continents and will account for a significant share of the world’s economic growth over the next few decades. But it is also the world’s most corrupt and backward continent.

Prime Minister Benjamin Netanyahu’s visit to Africa a year and a half ago signaled the new importance Israel places on the continent, 50 years after relations cooled in the wake of the Six-Day War. Still, declarations are not enough. For Israel to break into the African market, it needs a detailed plan and follow-through, which is why a first-ever Israeli-African business summit was held in Lagos this month.

The initiative for the Africa-Israel Forum came from Tel Aviv University, which, under President Yossi Klafter, has been building relationships with emerging hubs of knowhow and business. TAU already has business-academic forums together with China and India, and its new target is Africa. To that end, the university has developed ties with private sponsors, including philanthropists Stanley and Dr. Marion Bergman and the Israeli entrepreneur Eytan Stibbe, who has notched proven successes in Africa. But the primary connection it’s made is with the Brenthurst Foundation, which has extensive connections in Africa and helped TAU secure the sponsorship of Obasanjo, who hosted the conference at his home near Lagos.

Most improved leader

Obasanjo is a former general and chief of staff of the Nigerian Army. He was responsible for defeating Biafran rebels during a brutal civil war in the late 1960s that led to the deaths by hunger of 1 million Biafrans. On the other hand, as military ruler of Nigeria a decade later, Obasanjo peacefully moved the country toward democratic elections.

Two decades later, when the army was once again ruling Nigeria, Obasanjo became its sharpest critic and was imprisoned for three years. Following his release, he was elected president. Today, he is one of the most influential and highly regarded people in Africa, so his personal sponsorship of the conference was of immense significance.

The focus of the conference was agrotech. Israel is a leader in the field and Africa badly needs to improve crop yields. Yet, despite the perfect match, Israeli companies have had little success in agriculture or any other industry on the continent. The few that have succeeded did so by continuing to operate even after the 1960s golden age of Israeli-African ties ended. Defense companies have done well, too.

“Israel is involved in Africa primarily by way of arms and by political consulting – the less pretty aspects of the Israeli business world. You [Israelis] haven’t succeeded in building yourselves a stable democratic brand that wields influence for the good of the continent,” says Greg Mills, a Brenthurst Foundation director.

One of the few Israelis who have done well in Africa is Daniel Pinhasi, who has been involved in the continent since his days in the Foreign Ministry as a diplomat in South Africa and ambassador to Senegal. Pinhasi now acts as a consultant to Israeli companies operating on the continent, primarily in agriculture. It is patently obvious to Pinhasi why the Israelis have such a difficult time doing business in Africa.

“Africa is a game only for the big and powerful,” he says. “It takes an immense amount of capital and connections to make it here. With my connections on the continent, I speak to heads of state and it takes me 15 minutes to convince them of the need for the project. Except that then it will take another three years for me to raise the financing to close the deal. For someone who lacks connections, it would be very difficult to make any sort of deals, and after you do so, the implementation is close to impossible, including the fact that the payments simply do not arrive in time.”

Other difficulties, he says, are “that in Africa they never tell you no. You leave every meeting with an affirmative response, and only after three years of failed efforts do you understand that they never actually intended to do business with you. This is on top of the tremendous physical difficulties of doing business here – bureaucracy, long lines for receiving visas, the lack of roads, even the mosquitoes and disease.”

In Pinhasi’s view, the great difficulties are what justify the insanely high profit margins of business deals in Africa – a return of 25% to 50% would be considered a sure sign of corruption anywhere else in the world, but is standard for Africa. “There’s no other way – the returns on investment have to be very big to compensate for the risk. Anyone going into a business deal in Africa has to prepare to wait at least three years before they see any cash flow, which means that for the majority of startups it is practically hopeless.”

The lack of Israeli success in Africa is heart-rending, particularly given the noteworthy relative advantages that Israel has to offer, especially in agriculture and water. Pinhasi sees the agricultural sector not only as having abundant business potential, but also as a generator of social change in Africa.

“What is a school in Africa?” he asks. “It is 100 pupils of all ages in a single room, with a teacher who teaches all of the subjects and physically beats the pupils. Children don’t get anything from a school like that, so they don’t learn, they remain illiterate. In the next generation there will be hundreds of millions who don’t know how to do anything. The women, for instance, won’t even be able to work as cleaners, because they do not know what hygiene is. African governments don’t invest in education, because it’s a long-term investment – beyond the scope of the ruling president’s tenure.

“Therefore,” Pinhasi continues, “if you want to change Africa, you must generate change in the quality of life for rural Africans here and now. The only way to do so is with agriculture. If we can improve their profits from agriculture and raise them to an income level of 300 euros [$342] a month, they will be left with enough money to live on and give their child a private teacher, and also to start buying consumer goods.”

Yet this breakthrough is problematic, because to reach that 300 euros you have to fix the entire value chain of the farmer. “It isn’t enough to bring them modern seeds if they don’t have an irrigation system. An irrigation system won’t help if there is no fertilizer. Fertilizer won’t help if they don’t have the ability to get to the market and sell their crops and turn a profit. You have to treat the entire package, from start to finish, and that requires a great deal of effort, as well as cooperation between different companies,” says Pinhasi.

Pinhasi is riled by the lack of cooperation among Israeli companies. “If you’ve got one big company that has managed to win a project, why doesn’t it bring in more Israeli companies to deal with tangential issues, and in so doing giving more Israelis a foothold in Africa?”

One exceptional instance of collaboration between several Israeli companies may be found in the first tomato hothouse established in Nigeria. Built by Wells Hosa, which like everything else in Nigeria is owned by one of the wealthiest families in the country, it is the first attempt to grow tomatoes in the country with modern methods. The hothouses protect the plants from Nigeria’s torrential rains and from pests found in the soil. It not only uses drip-irrigation systems made by the Israeli company Netafim, but products made by Mapal Agriculture (hydroponic systems), Ginegar (plastic sheeting) and Pelemix (hydroponic substrate).

Entirely innovative, the hothouses aim to help end the scarcity of tomatoes, which are grown only in the country’s north, and only in the non-rainy season. The rest of the year they are imported and sell for $6 a kilogram, a price that the vast majority of Nigerians can’t pay. The first harvest of hothouse tomatoes has just been completed and have reached the local market (albeit for now in limited quantities) at one-quarter that price. The plan is to expand the hothouse operation in other parts of the country.

Another distinct advantage that Israel possesses is, of course, its experience in technology. More than a few Israeli startups have tried to penetrate the African market with cheap and frighteningly simple technologies. Cellphone use has spread rapidly across Africa in recent years, but few Africans can afford a smartphone. The solution is to give the phones the ability to surf the internet, like that offered by the Singaporean-Israeli company N-Frnds, whose technology connects basic cellphones to the internet cloud. The majority of the financing is provided by businesses trying to reach end-users in Africa.

China rules

Another Israeli company provides loans to farmers by means of scratch cards, which are sold in advance. The Israeli startup OKO provides crop insurance by means of SMS messages, and for those who can’t read or write it provides the service through a call center. Another company is attempting to penetrate the home water purification market with used dialysis filters.

There are, of course, also Israeli companies working in infrastructure development, most of them since the glory days of the 1960s. But Israel is judged to have no relative advantage when it comes to infrastructure, as these are colossal projects that require a great deal of capital as well as connections with the regime. On both counts, the Chinese dominate in Africa.

“The Chinese come in with a proposal for a billion-dollar project, and they bring the financing, as well, and along the way they also pay 10% commissions – $100 million – to the officials that approve the project. There’s no way to compete with them,” says one entrepreneur, who asked not to be named.

The elephant in the room, of course, is corruption. A successful Nigerian businessman, who asked not to be named, says with surprising candor that when pricing out any government contract, he allocates a margin of 20% for paying bribes. In some cases, he says, bribes can amount to 50%.

“There are projects that get stuck in the middle – that aren’t completed – because the government official has gone too far and hasn’t left any profit for the project itself,” he says.

Asked about the investigation into alleged bribery of African officials by the Israeli company Housing & Construction Ltd. and what an Israeli company that doesn’t want to pay bribes should do, the businessman breaks into peals of laughter. “What’s the problem?” he replies. “Let them take on a Nigerian partner, and he’ll pay the bribes.”

Nigeria is a particularly corrupt country, but there are countries in Africa like Ethiopia, Kenya, Tanzania and Ghana where it is possible to operate without bribes. Even in the most corrupt countries, there are strategies for avoiding bribery, for instance, by acting as a supplier to a project rather than being an equity partner. Another is to develop projects under the aegis of international bodies like the World Bank, from which officials don’t dare to demand bribes. Dealing exclusively with the private sector in another alterative. Anything involving technology tends to have fewer problems, maybe because government officials don’t understand it enough to know what they should be demanding bribes for.

In any event, even without bribes, no matter which country it is in Africa, you need connections to succeed and make deals. You need untold patience – particularly if you’re not paying bribes to expedite the process. Evidently, you need something else, as well, which both Mills and Pinhasi dwell on: The desire to work in Africa not only because of the huge profit potential, but out of a desire to help the most miserable, poorest people on the planet. Without a sense of mission, it is difficult to cope with the risks and obstacles.

“It would be worthwhile trying to do a pilot project in several countries in Africa, in which Israel would coordinate an effort to introduce Israeli technologies, and demonstrate to the other countries the change that it can generate,” says Pinhasi. “It would be good to do this in the more democratic and more transparent states in Africa. So far, we have been partners of the darkest regimes on the continent, but now we should specifically be developing relationships with the positive regimes.”

Partner Communications, Israel’s second-largest mobile phone operator, reported on Wednesday a 52% drop in quarterly profit as it continues to invest heavily in the deployment of a fiber optics network and its TV service. Partner earned 26 million shekels ($6.97 million) in the third quarter, down from 54 million a year earlier. Revenue slipped to 822 million shekels from 826 million, with its mobile subscriber base falling by 1% to 2.65 million. According to a Reuters poll of analysts, Partner was forecast to earn 24.7 million shekels on revenue of 821 million shekels. Partner’s revenue and profit have plunged in the wake of a 2012 reform that opened up the mobile market to new players, sharply reducing prices. It is seeking new revenue streams and investing to become an integrated multi-service telecoms group. The company said 118,000 households had connected to its internet-based TV service. Its fiber optics infrastructure now reaches more than 250,000 households. (Reuters)

Azrieli Group Q3 net profit edges up

Real estate developer Azrieli Group reported Wednesday third-quarter net profit of 264 million shekels ($71 million), up from 263 million shekels a year earlier. Excluding the effect of property revaluations, adjusted profit was up 8% to 241 million shekels. Azrieli, which built Tel Aviv’s Azrieli office and shopping complex, said net operating income, which reflects the group’s core business, rose 11% to 386 million. Occupancy rates at its shopping malls stood at 98%. (Reuters)

FIBI Q3 profit up, declares dividend

First International Bank of Israel, the country’s fifth-largest bank by assets, on Wednesday reported a 4.4% growth in third-quarter net profit and said it would pay a 100 million shekel dividend. FIBI posted quarterly net profit of 212 million shekels ($57 million), compared with 203 million a year earlier. It was forecast to earn 220 million shekels in a Reuters poll of analysts. Excluding one-time items, FIBI reported net profit of 178 million shekels versus 171 million in the same period last year. Net interest income rose to 634 million shekels from 565 million a year earlier while expenses from credit losses were up to 49 million shekels from 9 million. (Reuters)

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1.6677054Wed, 21 Nov 2018 22:26:16Gur Megiddo Wed, 21 Nov 2018 22:14:46A mere hour and 20 minutes passed between the time an employee of Lev Leviev’s diamond company LLD fell to her death from the company’s Ramat Gan offices and the company announced to the press that she had committed suicide due to pressure by police investigating the firm for alleged smuggling.

She died around 4:30 on Tuesday afternoon. At 5:50, the LLD investigative committee, headed by the communications experts, released their conclusions.

Police suspect that Leviev and his employees used smugglers to bring diamonds into Israel for decades without declaring them in accordance with the law. In the course of 16 years, they are thought to have smuggled in 300 million shekels in diamonds.

According to LLD’s accusations, the employee committed suicide after the police committed a gross violation of her rights. This claim comes from statements of her colleagues, who said that she was under emotional stress after being questioned by police, and said cops had told her “this whole case will fall on you.”

The woman, a 43-year-old married mother of three, was not a particularly senior employee. She worked in LLD’s account management department and took home a mere 6,000 shekels a month, according to LLD.

Currently it’s not clear whether the woman was questioned under caution. She was questioned by the police’s international investigations department in Lod for about two hours, but it’s not known whether police told her she may face charges. The police took several hours to formulate a response, but declined to give details about the employee’s questioning. The police spokesman’s office limited itself to saying that LLD’s release contained “inaccuracies.”

Both sides agree that the employee was not held in remand, or kept in a cell overnight, and therefore was not subjected to any of the police’s more questionable techniques, such as meeting an informant in the cell.

The claim that the police violated the woman’s rights is based on the fact that the woman never spoke with a lawyer. However, it’s not clear that she asked to, or that any lawyer was turned away. Another defendant in the LLD case did indeed face such a predicament, leading Rishon Letzion District Court Judge Guy Avnon to sharply criticize the police’s conduct.

While it’s possible the woman committed suicide due to police conduct, it could just as easily be that she took her life due to pressure from the company.

Meanwhile, the central suspect, Lev Leviev himself, has been in Russia since the affair broke.

While the motivation for the suspected smuggling is not known, one possibility is that Leviev and accomplices were allegedly trying to evade taxes or regulations in the countries where the diamonds were being mined, including Russia.

Leviev has apparently been preparing for months to face an investigation. Months before the investigation became public, he left his residence in the United Kingdom and entered Russia, where he has lots of associates in power. The day the affair broke, he already had three top attorneys and a PR firm working for him.

His team has been negotiating with police in an attempt to have them question him without arresting him.

In fact, nearly all of Israel’s diamond bourse knew about the investigation in advance. The state’s witness in the affair told a group of diamond merchants before it was public, said the attorney of Leviev’s son Zvulun Leviev.

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1.6676613Wed, 21 Nov 2018 22:11:33Gur Megiddo Wed, 21 Nov 2018 16:58:49During the first hearing in which authorities requested the extension of the remand of the suspects in the case of Lev Leviev’s LLD diamond firm, earlier this month, police Supt. Gal Chesner told the court that according to the evidence, LLD has systematically engaged in smuggling diamonds to Israel since 2002. One can presume, cautiously, that this statement is based on the testimony of the individual who has turned state’s evidence in the affair, whose name is protected by a gag order.

As it happens, a suit filed in 1999 against Leviev and this same witness alleged that in 1998 the latter took over a diamond polishing factory that served to cover the smuggling of unpolished stones from Russia to Israel. The lawsuit claimed, but never proved, that the takeover of the factory was funded by Leviev.

>> Who is Lev Leviev, the Israeli billionaire with ties to Jared Kushner and Putin

Under the taxation system that applied to the diamond industry until last year, the tax levied on diamond merchants was fixed at a percentage of the turnover of their business. Since there was no tax on importation of raw diamonds into Israel, there was no tax advantage to smuggling diamonds into the country.

In the case from 1999, the plaintiff argued that the business he had established for smuggling diamonds – which he subsequently accused the state witness and Leviev of stealing from him – had been intended to cheat not the Israeli authorities but rather the Russian government. This is because in Russia, diamond mining licenses prohibit the export of raw diamonds; they are required to be polished on Russian soil before they leave the country.

‘Just a cover for smuggling’

The names of the person who filed the 1999 suit and the individual against whom it was filed cannot be published here because the latter has turned state’s evidence in the latest case. What can be revealed is that the person who filed the suit is an uncle of the state witness, who via an Israel company and a chain of foreign companies held shares in a Russian diamond-polishing company.

According to the uncle’s testimony, that business served as a cover for smuggling activities, in case the Russian authorities chose to audit its compliance with the conditions of its mining license – among them the requirement to polish the diamonds on Russian soil.

“The Russians have large diamond mines, and the raw Russian diamonds were quite inexpensive,” wrote the uncle, in the statement he filed with the court. “However, Russian law does not allow export of raw diamonds – but rather requires that they be polished in Russia and exported only afterwards.”

“To export raw diamonds from Russia, the Israeli diamond merchants had to open a business for processing them inside Russia because the Russian syndicate, which is responsible for marketing the raw stones, would sell them only to a Russian polishing factory and only in accordance with the factory’s ability to process them,” the uncle said in his suit. “Instead of processing the raw diamonds in the factory inside Russia, which had been set up as a cover, it would use messengers to send the stones out of Russia without the knowledge of Russian authorities.”

Supreme Court Justice Hila Gerstel, who at the time was a Tel Aviv District Court judge, dismissed the uncle’s suit in 2002, and expressed discomfort with the crimes the plaintiff had described to the court with surprising frankness. “From the little that was revealed to me, it emerges that the parties created extensive networks of activity to circumvent Russian law and maximize their profits, while committing illegal acts under various guises,” Gerstel wrote in her ruling.

‘Leviev stole the trustee’

At the time his uncle filed the suit, the state witness was a young diamond merchant. According to the older man, the nephew began working for him the day he was discharged from the Israel Defense Forces, and in 1997 was appointed director of the polishing and smuggling operation (as the uncle described it). As a result, the witness moved to St. Petersburg to live for a while.

In 1998 the uncle’s company in Israel was liquidated, and as part of that process the liquidator sold the Russian factory to the nephew.

The uncle’s main beef against his nephew was that there had been an agreement between them, whereby the nephew was only purchasing the factory from the liquidator as a trustee on behalf of the uncle – and would later on return control of the factory to him. However, claimed the uncle, his nephew tricked him and concocted a plot with Lev Leviev, who wanted the factory for himself. According to the suit, Leviev paid for the nephew’s acquisition of the factory, knowing that he was facilitating a breach of the contract between the uncle and his nephew.

According to the lawsuit, “Leviev, who is one of the wealthiest men on the Diamond Exchange in Ramat Gan, was deeply involved in the Russian market and coveted the license from the Russian syndicate to acquire diamonds at a reduced price. Therefore, he decided to collaborate with the nephew to get control of this source and thereby caused the nephew to knowingly violate the trusteeship agreement with the plaintiff.”

Gerstel rejected the uncle’s claims in the matter of the contract with his nephew – now the state witness – noting the uncle had not presented sufficient evidence to prove his claims. Other claims, among them his assertion that he was the owner of a stock of diamonds that was kept in a safe at the factory, were also rejected.

Gerstel discredited the uncle for his having admitted to serious crimes in the context of the proceedings. She explained her rejection of his claims concerning the diamond stockpile by stating that given the extensive document forgeries he had described, he was responsible for his own inability to prove his claims. “The court will not display enthusiasm for a party stymied by evidentiary problems that he himself caused by his illegal deeds,” she wrote.

Gerstel added, “I learned from the plaintiff, in a clear and complete confession on his part, that his activity in Russia was aimed at deceiving the Russian authorities and at smuggling rough diamonds out of Russia, all in order to make good money. To this end, a complex, proficient and well-oiled system was developed.”

She continued: “The significance is that the plaintiff came to court without clean hands. He publicly declares that he violated the laws of a foreign country and engaged in smuggling diamonds. For this purpose he even forged Russian corporate documents. Now he’s complaining that his work is really difficult, because these documents describe an inventory that doesn’t exist and deny an existing inventory.”

Gerstel included in her ruling quotes from the plaintiff’s questioning by the liquidator, in which the plaintiff tells of how easily he could “cook the books” to hide the illegal smuggling operation. “If my books show missing caratage [a reference to diamonds] at the end of the year, I can in two minutes produce a document that resolves my caratage so that I have a surplus and not a deficit. That’s it; this whole business is very disorganized, we are not the only ones,” he told the liquidator.

“So in theory you can play with the same bag [small diamonds are often sold wrapped in bags] eight times?” the liquidator asked.

“Eight times; 22 times is also possible,” the uncle explained, and added, “Do you want documents for 10 million, right now? I’ll arrange you documents for 10 million.”

The part of the lawsuit relating to Leviev was also dismissed, on grounds that the plaintiff provided no proof of Leviev’s involvement in the plot he described to seize control of his smuggling business.

“With the exception of a few mere claims about a conspiracy by Leviev to take control of his business, I found no substantive argument against Leviev that was worthy of discussing. It seems that the defendants’ counsel is correct in his claim that Leviev was inserted into this lawsuit for one sole purpose – to use his prominence with relative ease as a ‘bargaining chip,’ and as a means of exerting pressure to reach a compromise agreement,” Gerstel wrote.

After 20 years

In March 2018, nearly 20 years after this lawsuit was filed, two employees of the company belonging to the man who is now the state witness company were arrested at Ben-Gurion Airport, with one of them carrying diamonds worth close to a million shekels on his person. The two carriers were questioned and quickly led the investigators to the state witness, who said he was providing services to Lev Leviev and his LLD company. After six months of covert investigations, detectives raided the offices of LLD and arrested several people, including Leviev’s son Zevulun. The method of operation that the police described during their request to extend detentions in the case was almost totally identical to what the uncle of the state’s witness had described in 1999.

The primary suspect, Lev Leviev, is currently in Russia and it isn’t clear when and if it will be possible to question him in the case.

So how were diamonds smuggled into Israel for so many years uninterrupted? One possible answer can be found in the testimony of the uncle to the company liquidator, which was included in the lawsuit he had filed, and in which the uncle hints that he had the cooperation of government officials. In the minutes of the liquidation file there appears the following exchange:

The uncle: “I have news for you, I can bring you as much as you want without sending the clerk.”

The liquidator: “With the stamp of the State of Israel?” (The reference is to the stamp by the diamond inspection department in the Economic Affairs Ministry.)

The uncle: “As much as you want, whatever sum you want.”

Liquidator: “Any caratage that you want?”

Uncle: “Whatever caratage you want, and whatever you want.”

The LLD company, which is owned by Leviev issued this statement earlier this month: “The company is not at all familiar with the event being reported in the press. Mr. Leviev and the companies he controls operate in keeping with proper norms, taking care to obey the law. We hope that this issue will be clarified quickly and the suspicions will emerge as baseless.”

The government has been up in arms over Airbnb’s announcement on Monday, and ministers have been seeking retribution in various ways.

There are only 200 Airbnb listings in West Bank settlements. Airbnb has more than 22,000 hosts in Israel.

The Justice Ministry believes a case could be built against Airbnb for violating the law against discrimination in provision of services, following an amendment from 2017 that blocked discrimination based on location of residence.

“Anyone who provides a product or service, or operates a public place, cannot discriminate in providing that product or service due to location of residence,” the clause states.

Such an interpretation of the law would necessitate defining Airbnb as an Israeli company, regardless of where its offices are actually located.

If the company is indeed found to be in violation of the law, this is both a civil infraction as well as a criminal offense. On the civil front, citizens who are harmed by the company’s actions could sue for up to 50,000 shekels ($13,400) in compensation without proving damages. In this case, plaintiffs could seek legal assistance from the Justice Ministry without having to prove financial need.

If the company is convicted, it could face a fine of up to 200,000 shekels for every offense and the court could order it to halt operations in Israel.

On Wednesday, Strategic Affairs Minister Gilad Erdan called for a boycott of Airbnb and promoted one of its rivals.

“I call today on all those who support Israel and oppose discriminatory boycotts: they should cease using Airbnb and turn to other services,” Erdan told a diplomatic conference hosted by the Jerusalem Post newspaper.

“By the way, Booking.com is a great service,” added Erdan, the point-man in Israeli government efforts to combat pro-Palestinian boycotts.

A spokesman for Airbnb declined to comment on Erdan’s remarks.

On Tuesday, Erdan said he would consult with the U.S. government on the matter.

“We will approach the U.S. government because 25 U.S. states have sanctions against American companies that boycott Israel,” Erdan said on Israeli Army Radio.

“In this respect, there is no distinction between this part or that part of the State of Israel,” he said, asserting that the West Bank, which Israel has never annexed, should also fall under the anti-boycott protection.

Airbnb said it has developed a framework for evaluating how it should treat listings in occupied territories around the world.

“Israel is a special place and our over 22,000 hosts are special people who have welcomed hundreds of thousands of guests to Israel. We understand that this is a hard and complicated issue and we appreciate everyone’s perspective,” Airbnb’s Global Head of Policy and Communications Chris Lehane said in an emailed statement.

Erdan said Airbnb “will have to explain why it is taking this discriminatory and racist line here in particular and not in other conflict zones in the world.”

Airbnb does not intend to remove Jewish homes in East Jerusalem, territory Israel annexed in a move not recognized abroad and which the Palestinians want for a future capital, or the Golan Heights, which Israel captured from Syria in the 1967 Middle East war.

With reporting by Reuters.

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1.6676998Wed, 21 Nov 2018 21:16:25Shelly AppelbergWed, 21 Nov 2018 21:11:42A major exit is in the works: Yokneam-based Lumenis is slated to be sold for $950 million, it emerged on Wednesday, after CVC brought Chinese fund FountainVest Partners into the deal in order to gain full control over the company.

The seller, the Chinese-European fund XIO, is slated to receive a return on its investment of 86% in three years. It put Lumenis up for sale a year ago with a price tag of more than $1 billion.

The final price has not been agreed on, but sector sources say it is likely to be around $950 million.

Lumenis was founded in 1991 under the name ESC, and started trading on the NASDAQ in 1996. By 1997 it was trading at a market capitalization of $1 billion, but just under a decade later, in 2006, it was withdrawn from trading with a market cap of a mere $47 million amid accusations of cooking the books and recording transactions inappropriately.

Udi Angel and Idan Ofer later acquired 80% of the company’s shares for $120 million, and in 2014 launched the company on the NASDAQ again at a $470 million capitalization. A year later, XIO bought out the company and took it private at a capitalization of $510 million.

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1.6675220Tue, 20 Nov 2018 23:23:33Gur Megiddo Tue, 20 Nov 2018 23:23:20An unnamed employee of Lev Leviev’s company LLD jumped to her death Tuesday, reportedly after she was questioned in connection to an investigation of alleged diamond-smuggling by Leviev family members and employees.

An LLD spokesman confirmed the death and said it came shortly after the woman was questioned by police as a possible suspect. The company linked the tragedy to police practices in the probe.

“We received with deep shock and sorrow the announcement of the loss of the company employee. We will take every step in our power to aid in the investigation of her death and to put an end to the unfortunate phenomenon of interrogees’ rights being trampled on, causing irreversible damage in order to create media headlines,” LLD said.

An Israel Police spokeswoman would neither confirm nor deny whether the suicide occurred after questioning and declined to comment on the accusation that investigators used excessive pressure.

The police are investigating suspicions that the Leviev Group systematically smuggled diamonds over a period of at least 16 years. The value of the stones smuggled in the past eight years alone was put at 300 million shekels ($80.4 million). Eight people, including Leviev’s son Zvulun, have been arrested in connection with the case, but the woman who took her life Tuesday was not believed to be among them.

The agreement was signed three weeks ago, just as new international regulations severely limitating the number of hours a pilot can fly per week, month and year went into effect. The rules aim to reduce pilots’ fatigue but also threatened to reduce their pay by tens of percent, since much of El Al pilots’ pay is in the form of overtime.

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As a publicly traded company, El Al would normally have to report details of the labor agreement, but in an October 29 statement to the Tel Aviv Stock Exchange it avoided that by saying it would have no material effect on its financial results.

“The agreement establishes mechanisms that are expected to enable us to operate more efficiently in the new era of aviation regulation and benefit both the company and the pilots,” Israel’s flag carrier said.

El Al shares closed down 3.8% to 1.12 shekels in a big market sell-off Tuesday, but before that the price had been up 4.3% since the pilots’ agreement was disclosed.

El Al has been facing growing competition from low-cost carriers in the wake of the Open Skies agreement with the European Union, which has allowed more carriers to operate and to offer more routes to more destinations. The airline has also had to cope with pilot labor slowdowns that often led to delayed or canceled flights.

Under the six-year agreement, TheMarker has learned, the pilots benefit from having their overtime pay converted into regular pay. Their hourly wage rises from 457 shekels ($123) an hour to 620 immediately and gradually climbs to 650 by 2020.

Overall, El Al’s wage bill is due to rise sharply — to 635 million shekels, from 533 million in 2017, not covering things like performance bonuses. Because pilots are now getting more of their salaries as base pay and not overtime, they social and pension benefits grow, too.

What El Al management gets back is a badly needed era of no strikes or labor slowdowns. It will also get more flexibility in scheduling pilots that will help it cut costs and increase the number of flights without hiring additional pilots.

Among the rules it won in the contract talks, 50% overtime pay no longer kicks in for pilots after they exceed 85 hours of work a month. Now, depending on the plane they are flying, overtime only begins after 105 hours, or as many as 115.

Other rules end double-staffing on flights over 10 hours and the merging of pilots flying Boeing 777s and 787s, thereby enabling the airline to move them more efficiently between flights.

Big corporations are becoming major players in financing Israeli startups, IVC Research said in a report released this week. Since the start of 2018, corporate venture capital funds have invested $807 million in Israeli high-tech, accounting for a fifth of the total. The biggest investors were Intel Capital, which has put money into 12 startups this year so far, followed by Dell Technology Capital and the VC unit of General Electric, which each invested in 10 startups. U.S. companies remain the leaders, accounting for $253 million of this year’s corporate startup investments, or a third of the total. That down from half five years ago, IVC said. European and Asian companies have accounted for most of the growth since then, putting is $229 million and $196 million, respectively. Even Israeli corporations have stepped up investment, although they remain smaller players: Five years ago they invested just $12 million and this year $53 million, according to IVC figures. (Irad Atzmon Schmayer)

After 16 years, SysAid raises its first-ever outside capital

SysAid, an Israeli-U.S. startup that provides software for managing service desks and other corporate operations, said on Tuesday it had raised $30 million in investment from the venture capital fund Israel Growth Partners. Even though the company has been around since 2002, SysAid said the investment marks its first funding round ever. Unusually for a startup, the company until now it has been self-financing and the new capital will be used to accelerate growth, SysAid said. The company claims more than 10,000 medium-size business customers and 9 million end-users worldwide who use it in finance, human resources and marketing applications. “We are dedicated to simplifying and streamlining the complexities of day-to-day life for IT professionals on the service desk,” said Sarah Lahav, who is CEO and the company’s first employee. It was founded by Israel Lifshitz, who is now chairman. The company has 130 employees, 100 of them in its Airport City offices in Israel. (Irad Atzmon Schmayer)

Tel Aviv shares finished sharply lower on Tuesday as Wall Street extended its losses. The S&P 500 index hit a three-week low on Tuesday as weak results and forecasts from a bunch of retailers fanned worries about holiday season sales and tech stocks continued to slide on concerns about iPhone sales. In Tel Aviv, the TA-35 and TA-125 indices both lost about 1.6% to end at 1,610.03 and 1,449.55 points, respectively, on turnover of 1.44 billion shekels ($390 million). Banks shares were hard hit, with Israel Discount sliding 2.65% to 12.49 shekel and Leumi 1.85% to 23.85. Bank Hapoalim got a double whammy with pressure on bank stock and news that controlling shareholder Arison Holdings was selling a 4.26% stake for 1.425 billion shekels. Gazit-Globe dropped 2.5% to 30.72 even as it swung to a small quarterly net profit of 1 million shekels for the third quarter, compared with a 185 million loss a year earlier. (TheMarker Staff)

Cellular, internet pace a sharp drop in Bezeq third-quarter earnings

Bezeq saw its third-quarter net profit plunge 27%, led by declines in its mobile phone and Internet services units. Israel’s biggest telecoms company said Tuesday that net fell to 234 million shekels ($63 million) from 322 million a year earlier, versus 255 million forecast by analysts polled by Reuters. Revenue slipped 4.7% to 2.3 billion shekels, close to forecasts. Net at Pelephone, Bezeq’s cellular subsidiary fell 75% to 6 million shekels. Bezeq said it had not received an answer from the Communications Ministry on its plan to merge its mobile phone, satellite television and Internet service provider businesses to cut costs. “We continue to believe that there is significant value to be unlocked at Bezeq and we trust that the launch of the upcoming strategic plan will help rebuild investors’ confidence and pave the way to the further re-rating of the shares,” said Barclays analyst Tavy Rosner. Bezeq shares ended down 4.2% at 4.47 shekels. (Reuters)

Netanyahu signs off on IMI takeover; Elbit net rises

As his first act as defense minister, Prime Minister Benjamin Netanyahu has signed the documents approving Elbit System’s to take over stated owned IMI Systems. The last remaining step to complete the 1.9 billion shekel ($510 million) merger between the two Israeli defense firms is for the heads of Elbit and the Government Corporations Authority to sign the final terms of the deal, which is expected to happen this week. Meanwhile, Elbit reported on Tuesday a 4% increase in third-quarter net profit, boosted by higher sales in North America and Asia as well as from its acquisition of U.S.-based Universal Avionics Systems Corporation. Elbit earned $1.50 a diluted share, up from $1.44 a year earlier, as revenues rose 12% to $895.2 million. Elbit’s order backlog, a barometer of future sales, climbed to $8.1 billion at the end of September from $7.6 billion a year earlier. Shares of Elbit finished down 0.75% at 435.90 shekels. (Hagai Amit and Yoram Gabison)

Delta shares fall as profit drops 33% due to one-time costs

Shares of Delta Galil fell on Tuesday after the apparel maker reported net profit fell by a third in the third quarter. Net income was $9.6 million, compared to $14.4 million last year, due to costs connected with closing its plant in Carmiel, and the acquisition of the French undergarments maker Eminence the company said. Discounting those factors, net was up 15% to $16.6 million as sales rose 9% year on year to $370.8 million. “During the quarter, we focused on consolidating Eminence Group, which made a strong contribution to sales in its first quarter as part of Delta Galil, while expanding our European presence,” said CEO Isaac Dabah. Delta said full-year 2018 sales were expected to reach as much as $1.5 billion, or up to 9%, from 2017. Net will range between $57 million and $60 million, an increase of 12%-18%, it said. Delta shares closed down 4% at 98.26 shekels ($26.34). (Eran Azran)

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1.6675061Tue, 20 Nov 2018 21:25:51Rina Rozenberg Kandel וRefaella GoichmanTue, 20 Nov 2018 20:59:07A day after the travel website Airbnb said it would no longer list homes or rooms in West Bank settlements, Israeli officials on Tuesday vowed to get the decision reversed and/or take revenge on the company.

“We will try to act on several levels to reverse this outrageous decision,” Tourism Minister Yariv Levin told TheMarker.

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“First, we have turned to the management of the company, demanding that the decision be canceled. We will help apartment owners to file claims in the United States in order to reach a situation that at least the company will have to compensate them for the damage it causes them,” he said.

Airbnb has grown to be a major factor in the Israeli tourism industry. In Tel Aviv alone it lists an estimated 9,000 properties and has helped the hotel industry cope with a shortage of rooms as incoming tourism to Israel has grown to record numbers this year. Airbnb rentals have also helped hold down the price of an Israeli holiday.

Monday’s decision by the company only affects what it estimated was about 200 listings in West Bank settlements. Nevertheless the Israeli government has said it will fight the ban on principle as an unfair act of discrimination and a violation of anti-boycott laws in the U.S.

Tourism Ministry officials said they are in regular contact with Airbnb executives, and were taken by surprise by the company’s decision.

Strategic Affairs Minister Gilad Erdan said Israel plans to consult with the U.S. government over Airbnb’s decision. “We will approach the U.S. government because 25 U.S. states have sanctions against American companies that boycott Israel,” Erdan, who is responsible for the government’s anti-boycott campaign, said on Army Radio.

Palestine Legal, a Palestinian rights group that monitors U.S. anti-boycott legislation, said on its website that some of the laws enacted at U.S.-state level apply both to Israel and “territories controlled by Israel,” an allusion to areas such as the West Bank.

Levin speculated that Airbnb’s couching its decision as a general principle not to do business anywhere in the world that is a “disputed” region was meant to provide legal cover in case of lawsuits.

He plans to counter Airbnb’s move by imposing what he called a “special tax” on the “activities of companies that take part in the BDS boycott or boycott Israel or any part of it,” and step up enforcement of tax rules on Airbnb renters. He also vowed to step up activities to market travel to Judea and Samaria.

Levin said he was raising the tax issues with the Israel Tax Authority and didn’t comment on what the special tax would be. However, as tourism minister he has no authority on tax issues, so that the most he can do is make recommendations.

In terms of a crackdown, the government has long resisted acting despite intense lobbying by the hotel industry that argues it can’t effectively compete if Airbnb renters aren’t subject to regulations or taxes, as the hotel industry is.

The Tax Authority has prepared a plan for more effectively taxing Airbnb renters and other shared-economy businesses. It is awaiting Finance Minister Moshe Kahlon’s approval. Kahlon, however, has adopted a strong stance against new and higher taxes.

Levin told TheMarker that short-term renters who find Airbnb less attractive because of the government’s tougher tax policy toward the company should simply list their properties on other websites.

“There will be no record levels of tourism and we need to find a solution. People will move to other platforms that will provide an answer both to apartment owners and those looking to rent,” he said. “It will also teach a lesson to those who want to boycott us. Airbnb isn’t the only one in this segment.”

With reporting from Reuters.

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1.6675031Tue, 20 Nov 2018 21:11:06JTATue, 20 Nov 2018 21:06:11The Quakers of Britain announced that the religious movement will no longer invest in companies that “profit from the occupation” of the West Bank.

The Quakers, also known as the Society of Friends, said in their announcement Monday that the decision was made by the church’s trustees in consultation with Meeting for Sufferings – the national representative body of Quakers. It said the Quakers have a long history of “pursuing ethical investments,” noting that it has taken decisions not to invest in the fossil fuel industry, arms companies and South Africa under apartheid.

“Our long history of working for a just peace in Palestine and Israel has opened our eyes to the many injustices and violations of international law arising from the military occupation of Palestine by the Israeli government,” Paul Parker, recording clerk for the Quakers in Britain, said in the statement. “With the occupation now in its 51st year, and with no end in near sight, we believe we have a moral duty to state publicly that we will not invest in any company profiting from the occupation.”

He also wrote: “As Quakers, we seek to live out our faith through everyday actions, including the choices we make about where to put our money. We believe strongly in the power of legitimate, nonviolent, democratic tools such as morally responsible investment to realize positive change in the world. We want to make sure our money and energies are instead put into places which support our commitments to peace, equality and justice.”

The religious organization said its portfolio does not hold investments in any company working in the West Bank.

The Meeting for Sufferings also reaffirmed a 2011 decision to boycott goods produced in Israeli settlements.

The main Jewish umbrella organization in England, the Board of Deputies of British Jews, slammed the decision.

“The appalling decision of the Friends House hierarchy to divest from just one country in the world – the only Jewish state – despite everything else going on around the globe, shows the dangers of the obsessive and tunnel-visioned approach that a narrow clique of church officials have taken in recent years,” the board’s president, Marie van der Zyl, said in a statement.

“While other churches have reached out to the Jewish community at this time of rising anti-Semitism and polarization to work together to tackle prejudice and promote peace in the region, the Quaker leadership has chosen to import a divisive conflict into our country, rather than export the peace that we all want to see.”

At least that’s what will happen based on legislation approved by the Knesset Economic Affairs Committee on Tuesday and now headed to the full legislature for two votes to become law. Travel agents and websites will be allowed to offer cheap travel packages, but the buyer won’t have the right to cancel.

The bill, sponsored by MK Bezalel Smotrich (Habayit Hayehudi) as an amendment to the Consumer Protection Law, will let agents and travel websites sell two kinds of deals for overseas airfare, hotels and packages – those with cancellation rights and those without.

They will have to make clear which is which or find themselves liable to a fine as high as 22,000 shekels ($5,920).

Today, consumers can cancel reservations under conditions spelled out by the law and pay a fee equal to 5% of the price up to 100 shekels.

Hanny Sobol, the head of the Israel Association of Travel Agencies and Consultants, told the committee he hoped the new law would bring more overseas travel business to Israeli agents and websites.

He cited a survey by the Smith Institute finding that 68% of consumers who buy tickets and reservations use foreign websites, even though the sellers consider themselves exempt from Israel’s Consumer Protection Law.

“When they try to cancel, they’re frustrated,” Sobol said. “The law, which will require full disclosure, will allow travel agencies in Israel to offer Israeli customers a wider range of products and prices, and make it easier for those customers to have clear cancellation conditions.”

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1.6662942Tue, 20 Nov 2018 05:03:41Yael Darel Tue, 20 Nov 2018 04:41:01Apartment rentals in Israel rose as much as 5% nationwide this year, with some cities showing double-digit increases and none showing declines, according to the first-ever survey of the Israeli market.

The survey, which was conducted by Ohad Danuss, former chairman of the Israel Real Estate Appraisers Association, found that rents had risen 4.95% on average this year through October for a four-room apartment in 16 of Israel’s biggest cities and 3.84% for three-room units.

The raises varied considerably between markets. In Be’er Sheva and Ashkelon, which experienced the biggest increases, rent on a four-room apartment jumped 16.7% this year to an average of 3,500 shekels ($945) a month, according to the survey.

Tel Aviv remained by far the most expensive city for rentals at 7,000 shekels on average for four rooms and 5,500 for three rooms. But the increases over the last year were relatively moderate, at 2.9% and 1.9%, respectively. In Holon, rents were unchanged for both sizes of apartments.

The sharp rise in rents comes despite the passage in the Knesset 18 months ago of the Fair Rental Law and efforts by the government to encourage contractors to build long-term rental units. Finance Minister Moshe Kahlon has put housing prices at the top of his agenda, but the focus has been mainly on people buying homes, not renting them.

The drive to build more long-term rental housing has so far achieved minimal results. In a country where some two million people rent apartments, construction on only 900 long-term rentals has been completed this year and only 6,000 rentals are in various stages of planning.

Erez Rozenbuch, chairman of the real estate investment trust Merureit, which was formed to develop long-term rental housing, said he was convinced despite the slow start that it was the solution to the problem of rising rents.

“The increase is rents in many cities in Israel testified to the fact that the rental sector is still unstable,” he said. “The situation deters potential renters who feel the trend is going to continue over the next few years. To stop the increases and enable the sector to prosper are necessary conditions in rents that are fair and whose terms are fixed for the life of the contract and includes realistic increases.”

Until Danuss’ survey, which is being published for the first time in TheMarker, there had been no systematic index of Israeli rents. The surveys that are published are usually based on information collected from online classified sites like Yad2.

A clause in the Fair Rental Law that would have required the government to establish a database was removed from the legislation before it was passed. Meanwhile, the methodology used by the Central Bureau of Statistics was found last January to be faulty.

Danuss, who said he planned to publish his index every half year, speculated that one reason for the rise in rents this year was Kahlon’s abortive plan to impose a tax on landlords who owned three or more residential properties.

Part of his plan to increase the supply of homes for sale, the High Court of Justice struck down the way in which it was legislated in the Knesset and the law never took effect. Nevertheless, said Danuss, many landlords expecting the tax to come into force raised rents in anticipation.

Declining housing starts may also have contributed to rising rents by constricting supply. In Ashkelon, for instance, only 98 residential building permits were approved in the first half of 2018, according to the CBS, down from 2,081 the year before.

Another city with sharp increases was Eilat, where rents on two-room apartments climbed 13.5% to 2,500 shekels a month. Four-room units rose 9.3% to 3,500 shekels.

“Eilat registered a big increase in rentals in 2018 mainly because of the big increase in incoming tourism and the number of apartments that were rented out through Airbnb,” said Danuss.

Among other major cities, rents on four-room apartments in Jerusalem rose a modest 2.3% in 2018 and 2.9% for three rooms. In Haifa, rents for four-room apartments shot up 7.7% on average.

Modiin rents increased between 1.1% and 1.5% for three- and four-room units and in Herzliya by 1.9% to 2.3%.

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1.6662711Tue, 20 Nov 2018 04:19:42Ora Coren וReutersMon, 19 Nov 2018 21:11:40When exports of Israeli natural gas to Egypt being sometime in the first half of next year, they won’t be going through the EMG pipeline in Sinai but through Israel’s domestic network and then on to the so-called pan-Arab pipeline.

Yossi Abu, chief executive of Delek Drilling, a partner in the two Israeli gas fields that will be selling energy to Egypt, said the EMG pipeline would only be used at a later stage. Later still, he said, gas from Israel’s Tamar and Leviathan fields could be delivered directly to EMG, thereby avoiding the Israeli domestic pipeline network altogether.

Speaking at an energy conference, Abu expressed optimism regarding exports not only to Egypt but to elsewhere in the region. Apart from exports to Egypt, he said the pipeline between Israel and Jordan would begin pumping in May or June next year and be fully operational by the end of 2019, ahead of schedule.

“We’ve succeeded in opening up the Egyptian economy, but that’s just the start,” Abu said. “There’s a lot to do on a regional level and that way become a global player.”

Abu spoke as Ron Adam, a Foreign Ministry official, told the conference that a decision on a Mediterranean gas pipeline linking Israel to Italy via Cyprus and Greece would be made next year after a market survey was completed.

If the survey reveals there is demand from European customers, the projected 2,100-kilometer, 25-billion-shekel ($6.75 billion) pipeline would come on line in 2025. An agreement between all the countries involved is expected to be signed at the end of the month.

The pipeline would open the Mediterranean market to Israeli and Cypriot gas, but it faces a host of engineering and cost challenges. Some experts say it will cost 35 billion shekels to build.

Regarding the Egyptian market, Abu answered critics of the deal by noting that even if Egypt continues to discover big reservoirs of gas off its Mediterranean coast, there is still likely to be demand for imported gas.

Earlier this year, Delek and its partners led by Texas-based Noble Energy signed a deal to sell 7 billion cubic meters of gas to the Egyptian company Dolphinus, half from the Tamar field, which will start exports in the first half of 2019, and half from Leviathan, after it goes into product toward the end of next year.

“We are taking into account that there will be other discoveries in Egypt,” he said, estimating that Egypt will need between 20 and 40 BCM of gas imported from Israel and from Cyprus, where Delek and Noble are partners in the Aphrodite field.

“There’s room for everyone. The Egyptian economy has become the father of the regional market,” he said.

Regarding demand in Israel, Abu put it at about 11 BCM, of which 10 BCM will be supplied from Tamar. By 2020, demand will have grown to 14 BCM partly due to the huge power needs of desalination plants, while another big jump in usage will come when Israel Electric Corporation’s Orot Rabin plant goes over to gas in 2021.

Abu said Delek Drilling is looking to spin off its remaining 22% stake in Tamar in 2019 overseas.

Last year Delek sold a 9.25% stake in Tamar to a new company called Tamar Petroleum, which has since expanded its stake to 16.75%. Abu said Delek Drilling is now focusing abroad, including the Euronext market, because the local market is already fully exposed to Tamar as an investment.

“We are looking to duplicate what we did with Tamar Petroleum but in the international market. It’s a process that is gaining momentum and we hope to finish it in 2019,” Abu said at the Israel Energy & Business Convention.

Bank Leumi is planning to launch its online banking service Pepper in the United States, CEO Rakefet Russak-Aminoach told the Financial Times in an interview published on Monday. “We said we wanted to go overseas and we searched wide,” she said. The bank had weighed expanding to India before the U.S. was chosen as its first overseas market due to its size and because American banks are so technologically advanced in most, but not all, respects. She added that expansion was influenced by inquiries from foreign banks and potential partners. “We… are currently pursuing several options for collaborations in the U.S. with significant and interesting players,” Russak-Aminoach said, without revealing any names. Leumi will take a minority stake in a Pepper USA operation, she said. Launched in June 2017, Pepper provides all ordinary banking services through its app, including transferring funds, applying for loans, ordering credit cards and check books as well as managing accounts. Leumi shares finished 1.3% higher at 24.30 shekels ($6.56). (Michael Rochvarger)

Harel drops Isracard as future partner in favor of Leumi Card

Insurance company Harel is reportedly in the process of changing partners between Israel’s two biggest credit card companies. Harel let lapse at the end of October a memorandum of understanding with Isracard to form a partnership to provide insurance and loans to households and small businesses. Instead, it is now in negotiations to form a similar partnership with Leumi Card. Harel assumed that when it signed the MOU that Isracard would be sold by Bank Hapoalim to another controlling shareholder, but talks between the bank and the U.S. private equity fund Bain Capital, the sole bidder, are stuck. Meanwhile, Bank Leumi has agreed to sell its Leumi Card to another U.S. PE fund, Warburg Pincus. Harel is said to be talking with Warburg about buying a stake in Leumi Card and forming joint ventures in insurance and consumer credit. Both areas are regarded as growth engines for the credit card companies as they are spun off from their bank owners. (Michael Rochvarger)

In its first financial report since its CEO Harel Wizel was accused of sexual harassment, the apparel chain Fox Wizel reported double-digit gains in sales and profits, seeing its share price soaring. The company said third-quarter net profit jumped 70% to 35 million shekels ($9.5 million) as sales climbed 38% to 547 million shekels. Most of the growth was due to new brands added to its portfolio, such as Foot Locker and Urban Outfitters. Nevertheless it showed Fox was coping with the rise of online shopping and the harassment accusations, which surfaced last August. An October report by an outside investigator cleared Wizel and others of any alleged violations. “Fox has proven again and again that despite challenging market conditions it has created the tools to cope with in the challenges facing the fashion market,” said Gil Datner, analyst at Leumi Capital Markets. Fox shares ended 7.4% higher at 83.49 shekels. (Eran Azran)

Evogene spinning off its agrochemical operations into subsidiary

Evogene, an Israeli biotechnology company, said on Monday it was spinning off its agrochemicals operations into a separate subsidiary that it may eventually take public. Called AgPlenus, the new unit will focus on developing next generation products and have access to Evogene’s Computational Predictive Biology platform to continue product development. It said its agrochemical operations, which began in 2014, now had a substantial product pipeline focusing on herbicides and insecticides as well as a market strategy. Evogene’s collaborations with global companies such as BASF and ICL will also be transferred to the new subsidiary, it added.” In the future, it may also allow potential investors direct access to this unique agrochemical pipeline,” said Evogene CEO Ofer Haviv. He said that access could come by enlisting strategic investors or through an initial public offering. Evogene shares were down 11.9% at $2.51 late morning local time in New York. (Yoram Gabison)

Blue chips weigh on Tel Aviv shares

Tel Aviv shares ended lower on Monday as the benchmark TA-35 index slipped into minus territory in the final 90 minutes of trading. The TA-35 closed 0.3% lower at 1,635.71 points, while the TA-125 lost 0.2% to 1,473.50, on light turnover of 1.05 billion shekels ($280 million). The TA-35 was weighed down by blue chips Teva Pharmaceuticals (down 1.9% at 81.40 shekels), Nice (down 1% to 419) and Israel Discount bank (down 1.2% to 12.83). Telecoms stocks gained for a second day – Partner Communications rose 2.5% to close at 19.08, Cellcom Israel 2.4% to 24.787 and Bezeq added 2% to 4.66. Electra Consumer, which controls Golan Telecom, rose 3.7% to 36.55, despite reporting a sharp downturn in third-quarter net profit to 14 million shekels from 42 million a year earlier. Dor Alon rose 0.1% to 50.06. The holding company said on Monday that net fell 16% year on year to 28.1 million shekels in the quarter. (Jasmin Gueta)

The Japanese insurance giant Sompo Holdings is deepening its ties with Israel’s high-tech industry. After establishing Sompo Digital Lab in Tel Aviv, it said on Monday that it would be partnering with two Israeli cyber startups to open the Japanese market for them. The two startups are Panorays, which automates cybersecurity management, and an unnamed startup that deals with cyber intelligence, Sompo said. The two will work with a business division Sompo launched last year to provide cyber services to Japanese companies. Much of the unit’s operations will be based on partnerships with Israeli cyber companies, it said. “We expect this partnership to yield revenues of millions of dollars in the coming years,” said Yoshihisa Miyazaki, an executive, at Sompo Cyber Security Beyond partnerships, Sompo is expected to invest $1 million to$5 million in companies active in these fields by means of a joint corporate fund with the American company Translink and in some cases invest directly. (TheMarker Staff)

Investment in Israeli fintech startups climbed 33% in first half

Investment in Israel financial technology startups is growing quickly as multinational companies are tapping startups directly for innovation rather than just setting up local research and development centers. Figures from Startup Nation Central show that investment in Israeli fintech startups jumped 33% in the first half of 2018 from a year earlier to a record of more than $400 million. Nearly three quarters of the round involved foreign capital and 38% came from overseas financial service companies, it said. With more than 300 multinational R&D centers in Israel, recruiting the best local talent has become difficult.”MNCs understand now that opening a local R&D center is perhaps the best or only way to enter the Israeli ecosystem,” explained May Nechushtan, fintech sector lead at Start-Up Nation Central, Among the alterative they are employing are technology accelerators (AXA and Mastercard), innovation labs (TD Bank) and investing in venture capital capitals funds (BNP Paribas). (TheMarker Staff)

U.K. delegation in Israel to meet with fintech startups

A delegation of U.K. financial-services executives is visiting Israel this week on the hunt for financial-technology startups to investment in and partnerships with companies offering advanced payment technology. The group, which arrived on Sunday, is being led by Ann Cairns, vice chairwoman of Mastercard, includes executives from Citbank, telecom equipment supplier BigChange, scanner maker Zapper, payment firm Payzone and International Consolidated Airlines Group. “It’s hard to find today a British company that doesn’t use Israeli innovation,” said Hugo Bieber, CEO of UK Israel Business, the group organizing the delegation. “Israel Business sees huge benefits to U.K. companies in adopting more cutting-edge innovations from Israel.” The delegation is meeting with, among others, Check Point Software Technologies CEO Gil Shwed, OrCam Technologies CEO Ziv Aviram, Viola Ventures General Partner Avi Zeevi, Jerusalem Venture Partners Chairman Erel Margalit, Start-up Nation Central CEO Eugene Kandel, and others from Israel’s startup and technology sector. (Sagi Cohen)

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1.6661005Mon, 19 Nov 2018 17:22:42Yael Darel Mon, 19 Nov 2018 17:22:33The Israel of 2050 will be a land of apartment towers, with nearly all other activity from shopping to manufacturing to road travel taking place underground. In the entire country, there will be no more than 700,000 dunams (175,000 acres) of open space.

This dystopian vision of Israel just 33 years from now is contained a report released this week by The Forum for Population, Environment and Society, “Zafuf” in Israel. The research team behind the report says Israelis will need to be living in towers and doing everything else underground because there will be more than twice as many people living in the country.

“In the Israel of 2050, 18 million will be living in the country and 98% of them will live in giant towers,” the team predicts. “The few villages that are left will be artificial ones, products of preservation policies.”

The report was drafted by Prof. Rachelle Alterman of the Samuel Neaman Institute for National Policy Research, Prof. Manuel Trajtenberg, Prof. Dan Ben-David, Iris Hann, the CEO of The Society for the Protection of Nature in Israel, and Prof. Shlomo Bekhor.

Dan Perry, a former head of Israel’s Israel Nature and Parks Authority and a contributor to the study, said a doubling of buildings and infrastructure will make Israel’s landscape almost unrecognizable.

“This multiplication, with all the infrastructure and roads, will result in a single concrete carpet stretching [along Israel’s coast] from Ashkelon to Nahariya, with metastases to the north and south, which have direct implications for population growth,” he writes.

He said intelligent, long-term planning can mitigate the damage but not eliminate it. “Even with ideal planning, which is light years from the planning under way today, the expected damage [to the environment] will be severe,” he warned.

Perry faulted the government’s current policies, in particularly the rush to build new homes to stem the sharp rise in housing prices, which hasn’t acted to deter low-rise housing or exploit all the land in urban areas. He said open land was being developed at a rate of 7,000 dunams annually, a pace that will leave Israel with between 600,000 and 700,000 dunams by the time Israel marks its 100th anniversary in 2048.

Some countries have already adapted to life in apartment towers, but Israelis will have a much harder time.

“Towers aren’t appropriate for the way Israeli families are structured,” it said. “While people in Singapore, Hong Kong and other developed, populous countries enjoy a high quality of life living in towers, their birth rate is completely different than that of Israel. Our families have an average of 3.1 children while in Singapore the rate is 0.9. It’s a crowded country, but it’s a different kind of crowding. It’s very hard to maintain a proper family life in a tower.”

The study warns that tower-living deters residents from forming strong community ties, either with fellow residents in the tower or between towers. There will also be the problem of maintaining the towers both inside and outside because of the high cost.

Perry said that even though Singapore itself is extraordinarily crowded, with an average of 8,000 people per square kilometer versus Israel’s 400, Singapore is a city. It draws on open land available in neighboring Malaysia for food, water and leisure activities — something Israel can’t do.

Prof. Bekhor of the Technion-Israel Institute of Technology said another important difference between Israel and the most crowded Asian countries is living space. Israeli families on average enjoy 150 square meters of living space, compared with just 30 in Japan.

He expressed doubt that Israelis would be willing to adapt the lifestyle of Singaporeans or Japanese. Israel’s government is not in a position to force the change either, he said.

“Singaporean society is significantly different from Israeli society and Singapore’s government isn’t democratic. To buy a car there you have to overcome all kinds of restrictions,” Bekhor explained. “In these conditions, it’s much easier to manage transportation in a crowded society, but the price is a loss of personal freedom.”

The report was drafted by Prof. Rachelle Alterman of the Samuel Neaman Institute for National Policy Research, Prof. Manuel Trajtenberg, Prof. Dan Ben-David, Iris Hann, the CEO of The Society for the Protection of Nature in Israel, and Prof. Shlomo Bekhor.

It was presented this week at the annual conference of Zafuf, an Israeli organization dedicated to expanding cooperation among researchers working on population issues and to raising awareness of growing problems. It is led by Prof. Alon Tal of Tel Aviv University and Dr. Eyal Rotenberg of the Weizmann Institute.

Correction (November 21, 2018): An earlier version of this article incorrectly reported the name of the organization behind the report and has since been corrected. It was published by the Zafuf: The Israel Forum for Population, Environment and Society. In addition, the article incorrectly stated that the team was led by Prof. Rachelle Alterman and has since been amended.

Amir Yaron, a professor at the Wharton School of the University of Pennsylvania, looks set to be the next governor of Israel’s central bank after the Israeli cabinet approved his nomination on Sunday. “I am aware of the heavy responsibility placed on my shoulders, and I will do all in my power to fortify the strength and continued growth of the Israeli economy,” Yaron, 54, said in a statement immediately after the cabinet decision. He still needs the approval of President Reuven Rivlin, which is expected. Yaron has lived in the United States for two decades. He cleared a special vetting panel earlier in November and would be sworn in on December 24, the Bank of Israel said in a separate statement. Yaron will succeed Karnit Flug, whose five-year term ended last week. Deputy Governor Nadine Baudot-Trajtenberg is currently acting governor and will head the monetary policy committee meeting on interest rates on November 26. (Reuters)

Brookland Upreal tells bondholders it may not be able to repay debt in 2019

Brookland Upreal, the New York-based real estate developer whose bonds are traded on the Tel Aviv Stock Exchange, warned bondholders at an emergency meeting on Thursday there was a risk it would not be able to repay them next year. The company detailed a long list of problems it is confronting, including contractors refusing to work at building sites, controlling shareholders injecting money into the company to ensure salaries were paid and late payments on the interest portion of some loans. “The current situation prevents me from coming to Israel, but I believe that we will meet investors face to face in the near future,” Boaz Gilad, one of the controlling shareholders, told investors by telephone from New York. He said Brookland was suffering delays in selling apartments and getting certificates of occupancy. One of a slew of foreign property developers to issue bonds on the TASE, Brookland owes about 150 million shekels ($40.5 million) to Israeli bondholders. (Eran Azran)

Fallen tycoon Joseph Greenfeld reaches debt agreement

After lengthy negotiations, Joseph Greenfeld, one of the controlling shareholders of the Kardan Group, reached a deal on Sunday that spares him being declared bankrupt but leaves his four bank creditors taking a big haircut on the 340 million shekels ($92 million) he owes them. Under the deal he reached with attorney Ofer Shapira, who is acting as special administrator of his assets, Greenfeld will repay 20 million shekels immediately from a loan he has taken from the Eini family. He also has to sell over his luxury Tel Aviv apartment to one of the banks, Union, within 42 months and turn over half the proceeds to creditors (the other half belongs to Greenfeld’s wife). He will also repay 30,000 shekels of debt a month over the next five years and turn over shares in Kardan NV to creditors. Banking sources said the debt agreement would yield them more money than having Greenfeld declared bankrupt. (Michael Rochvarger)

Mortgage lending profits at Israeli banks soared in first nine months

Israel’s four biggest banks saw their profits from mortgage lending jump 26.6% in the first nine months of 2018 from the same time last year to about 1 billion shekels ($270 million), according to their quarterly reports. The figure comes as Hapoalim, Leumi, Mizrahi Tefahot and Israel Discount have reported their third quarter results; First International will report theirs on Wednesday. The jump in mortgage profits is in part due to the spread between mortgage rates and Israeli government bonds of 10-15 years, which are 1% to 1.5%, an attractive figure rate at a time of near-zero interest rates. A strong Israeli economy and a low jobless rate have enabled the banks to reduce credit-loss expenses to nearly nil. Home loan rates have risen in recent years even as the Bank of Israel base rate has held steady, but with the central bank rate expected to begin rising soon, Israeli banks expect to hike mortgage rates further. Banks are keen to keep lending even though home prices have begun to fall. (Michael Rochvarger)

Shares post gains but close off daily peak

Tel Aviv shares ended higher on Sunday, but spent most of the day drifting down from gains made early in the session. The benchmark TA-35 index finished down 0.35% at 1,640.61 points, while the TA-125 added 0.3% to 1,476.51, on light turnover of 483 million shekels ($130.4 million). Among the top gainers in the TA-125, Opko Health ended up 3.8%at 13 shekels and Nice advanced 3.1% to 423.40. Cellular operators rallied, with Partner Communication’s climbing 1.8% to 18.62 and Cellcom Israel rising 2% to 24.20. Among losers, TowerJazz extended losses, dropping 1.8% to 54.07 and Israel Chemicals dropped 1.3% to 22.92. In foreign currency trading, the euro strengthened more than 0.9% on Friday to a representative rate of 4.2169 shekels while the dollar gained 0.6% on the shekel to 3.7170. In the bond market, ADO Group raised 150 million shekels in a sale of bonds to institutional investors at a yield of 1.89%. (Michael Rochvarger)

Israel Securities Authority investigators raided El Al’s offices on Wednesday evening as part of an investigation into insider trading, and questioned senior employees. Other senior employees have been called in for questioning at the ISA offices on Thursday. The company’s share price gained 7.7% on Wednesday, before news of the investigation broke. El Al’s share price has been benefiting from the sharp 15% drop in fuel prices since October. The company has said that every one-cent difference in fuel prices works out to $2.6 million a year for the company’s expenses, which would mean that the current price change will save El Al $91 million a year. The company’s share jumped 8.5% on October 15 on an unusual turnover of 12 million shekels, after the company confirmed to the media that negotiations on a new labor agreement with its pilots had advanced. (Yoram Gabison and Gur Meggido)

Elbit Systems wins $167m Asia-Pacific deal

Defense electronics firm Elbit Systems said on Wednesday it won a $167 million contract from an Asia-Pacific country to supply an aerial intelligence, surveillance, target acquisition and reconnaissance system. The contract will be carried out over 20 months. Elbit did not name the country. Elbit CEO Bezhalel Machlis, said the company was seeing growing demand for the unmanned aerial intelligence systems it offers as customers seek wider capabilities. (Reuters)

TASE drops on Lieberman resignation news

The Tel Aviv Stock Exchange finished the trading day with losses, against the background of Defense Minister Avigdor Lieberman’s resignation. The blue-chip Tel Aviv-35 Index lost 0.7% to close at 1,636 points, while the broader Tel Aviv-125 Index lost 0.65% to close at 1,474 points. Total turnover was 1.39 billion shekels. (Shelly Appelberg)

For Lieberman, the timing couldn’t have been better: One day after a cease-fire was reached with Hamas in the Gaza Strip, the defense minister’s announcement hit Prime Minister Benjamin Netanyahu from the right, as Lieberman presents himself as a “politician with principles.”

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Less than a day after his associate Moshe Leon was elected mayor of Jerusalem, Lieberman is departing as a politician who scored an important accomplishment, and after managing to strike a political deal with the ultra-Orthodox parties. Whether that partnership will hold up once the interests in Jerusalem are no longer relevant is yet to be seen.

Lieberman is leaving behind a lot of rubble that will need to be cleared. Uncertainty raged, and Netanyahu is just as likely to call immediate elections as he is to continue in his coalition with a paper-thin majority and to hold the defense portfolio himself.

It’s best that he call elections now. In any case the political establishment has spent months waiting for elections to be called; no one believes the government will hold out until the official election day in November 2019. Lieberman is only expediting a foregone conclusion.

It’s also the best choice for Israel’s economy. The uncertainty regarding the timing of the next national election will end, and the competition between politicians over who can propose the craziest, least responsible bills and cabinet resolutions will end.

The other option, of the current government plodding on, seems less reasonable, even though this seems to be Netanyahu’s preference. Netanyahu is very much against having Lieberman set the timing of elections for him, and being forced into an election campaign where he’s painted as weak and capitulating to Hamas.

This latter option is causing Israel’s budget and finance professionals to loose sleep, since this would mean the government losing all restraint in its financial decisions.

Here are only some of the government’s irresponsible decisions: Enabling a chicken cartel, enabling mortgages of up to 90%, preventing competitive cement imports, giving in to the police’s salary demands, and significantly increasing the defense budget in order to restore Netanyahu’s image as “Mr. Defense” — all these are liable to make 2019 an endless election year as all limits are breached. The damage to Israel’s economy could be massive. Meanwhile, the politicians have stopped worrying about adhering to the budget deficit target.

For this reason, from the moment that Lieberman resigned, the financial professionals have been watching with concern. A stressed prime minister, and an even more stressed finance minister, are not an auspicious way to start the year. Israel may be overshooting its deficit target for 2018, at 3.1% to 3.3% of gross domestic product. We may yet miss that figure next year.

“My expectation is that it can start at any of the next few meetings,” Bank of Israel Governor Karnit Flug said in an interview with Reuters on her last day in office.

The next rate decision is November 26, followed by January 10.

After five years at the helm, Flug is stepping down and will likely be replaced by U.S. finance professor Amir Yaron, pending cabinet approval. Deputy Governor Nadine Baudot-Trajtenberg was acting governor as of Wednesday.

During Flug’s tenure, interest rates have never risen, while the benchmark interest rate has remained at a record low of 0.1% since early 2015. The last rate hike was under Stanley Fischer in mid-2011.

Flug said that in recent years, the central bank debated whether to take unconventional measures, such as negative rates, but given solid growth and an upward trend of inflation, the monetary policy committee decided such steps were not necessary.

Instead, it took a number of measures to make it tougher to get mortgages to counter a jump in housing costs, partly caused by near zero interest rates.

The central bank had been expected to start raising rates already in the fourth quarter but an easing of inflation back to an annual rate of 1.2% in September, near the bottom of the government’s target range of 1% to 3%, likely pushed any hikes into 2019. The bank’s staff projects 40 basis points of tightening next year.

“My expectation is that (rate hikes) will be gradual,” Flug said. “We have not seen inflation rising up very rapidly so we don’t want to counteract the entrenchment of inflation in the target range. ... But you also don’t want to be behind the curve. This is the kind of balance every central bank has to make in the process of normalization.”

Flug said one key factor in keeping inflation down the past few years, the strong shekel, has waned as the currency has weakened somewhat, although higher competition in the economy remains.

“The tightness in the labor market is a force that will push inflation up,” she said.

Flug said she was satisfied with the central bank’s policies the past five years. “Growth has been strong, employment has been strong and unemployment is low. ... We have price stability,” she said. “Monetary policy did do the job.”

She also cited as successes boosting competition in the banking sector, reforms in making it easier and cheaper for consumers to get credit, as well as working to keep fiscal policies in check.

But Flug said she wished she could have convinced lawmakers to approve two items — raising the retirement age for women from its current 62 and creating a financial stability board like many other countries did after the financial crisis.

Despite a flare-up in violence between Hamas militants in the Gaza Strip and Israeli forces, Flug doubts there will be an economic impact, saying: “We have had in the past some security issues and the economy exhibited resilient to those.”

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1.6653484Wed, 14 Nov 2018 02:52:51Hagai AmitWed, 14 Nov 2018 02:51:39“The budget deficit ballooned even without a war in Gaza – all it will take is a new round of fighting and the deficit will skyrocket.” These words were expressed over the last few months when I asked two former treasury officials about the government’s growing overspending.

What was then only a theoretical problem looked over the last two days as if it would emerge into a real one. A cease-fire agreement appeared to have been reached late Tuesday evening, but the risk remains that it won’t hold and/or that real conflict will eventually break out.

>> Analysis: Why Netanyahu will do almost anything for a cease-fire ■ Why Hamas' missile attack on Israeli bus actually shows it's not looking to spark full-on Gaza war ■ Hamas tries to dictate new rules of game in Gaza, but it may be misjudging Israel

In the meantime, the first lines of the Defense Ministry’s Excel sheet, summarizing the costs of fighting is being filled in with big numbers and will be presented to the Finance Ministry when it is all over. As it is, the government is contending with a swelling budget deficit and now it has more expenses.

No one knows how many sorties the Israeli Air Force flew over Gaza this week, but it is known that the cost of a single Iron Dome anti-missile of between $50,000 and $100,000 and as of 5 P.M. Monday more than 100 of them had been used. An hour of flying time by a fighter jet runs to $20,000 and smart bombs cost tens to hundreds of thousands of shekels each, depending on how accurate they are. The ones used in Gaza have to be very accurate.

On the ground, precision tank shells cost in the tens of thousands of shekels each. To that is added the costs of running tank engineers and of transporting the tanks themselves to the border by truck. Bringing troops down south is another expense and is the loss of the services they are supposed to be performing while they are there.

In 2014, the 51-day Operation Protective Edge had a price tag of 8 billion shekels ($2.2 billion at the current exchange rates) – and that figure was only arrived at as a compromise at the end of long negotiations between the defense and finance ministries.

The war costs were one reason why Finance Minister Yair Lapid had to contend with a fiscal crisis during his term. If the fighting this week had become a real war, Moshe Kahlon, his successor, would face the same, if not worse.

A back-of-the-envelope calculation shows that Protective Edge, which included ground incursions into Gaza, cost on average 160 million shekels a day. The daily cost of the current round of hostilities is certainly less but still probably has come to tens of millions of shekels. The bill will soon be presented to the treasury.

And that doesn’t include the losses to the economy from businesses in the range of Hamas missile fire.

The fighting has also again laid bare the fact that large number of Israelis living just kilometers from the Gaza border still do not have fortified security rooms (mamads) in their homes.

It’s become a big business locally, with advertisements in regional weeklies coming on with pitches like, “You don’t have a mamad? In the next round, your family should be protected? We can build a fortified room in 10 work days using a new system that’s cleared Homefront Command trials.”

In the last nine years, the government has invested 1.5 billion shekels in fortifying rooms in private homes. More than 10,000 mamads have been built in 44 towns in the area adjacent to Gaza and (officially at least) no home within seven kilometers of Gaza is supposed to be without one.

In practice, that’s not the case. Many have underground shelters dating back from before the 1990s, which can’t house a family that needs to sleep in them overnight. Others are agricultural buildings that were converted into homes and were never approved for a mamad.

The message is that on top of the costs of fighting, Israel still needs to invest hundreds of millions of shekels for shelters.

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1.6653486Wed, 14 Nov 2018 02:33:03Gabriela Davidovich-Weisberg וAvi Waksman Wed, 14 Nov 2018 02:32:56When the first sirens went off in the Be’er Sheva on Monday, it didn’t take long for the phone to start ringing repeatedly at the city’s Giggsi Sports Bar. It wasn’t to check up on owner Asaf Ben-Attiah’s well-being, but to cancel reservations.

“More than 120 people who reserved tables never came. For the one table we have where the reservations were kept, only half the diners showed up,” said Ben-Attiah.

Monday afternoon, when Giggsi is usually filled with 300 or so people, he counted only 15.

>> Analysis: Why Netanyahu will do almost anything for a cease-fire ■ Why Hamas' missile attack on Israeli bus actually shows it's not looking to spark full-on Gaza war ■ Hamas tries to dictate new rules of game in Gaza, but it may be misjudging Israel

Ben-Attiah estimated his losses amounted to 50,000 shekels ($13,500) just in two days. “If it continues like this a few more days, it’s going to be a real problem,” he said before news surfaced Tuesday that Israel and Hamas had agreed to cease-fire terms.

The situation at Giggsi isn’t unusual in the south, where many towns and cities have come under fire since Monday. The Iron Dome has brought down a lot of rockets, but still several homes have been hit, one man was killed and scores injured.

Even in a place where Israel’s conflict with Hamas is part of life, the impact on business has been immediate and severe. Restaurants have been hurt the worst for now, but those in the tourism business are worried that news of the fighting will lead to a wave of cancelled visits to Israel.

“The situation can’t continue like this,” said Ben-Attiah. “We live with a constantly sense of uncertainty – whether it’s security alerts, or sirens or just plain fear. They should decide if there’s going to be [a war] or not,” he said.

On Tuesday, Finance Minister Moshe Kahlon promised Israelis living near Gaza that they would get some compensation for lost work days and damage to businesses.

Kahlon said he had agreed with Eran Yaacov, who heads the Israel Tax Authority, to provide financial aid to parents who were forced to stay home with children and not go to work after the Home Front Command ordered schools within 40 kilometers of Gaza closed.

Tourism-related businesses inside the range that were hurt due to the fighting, as well as beekeepers whose businesses were hurt by incendiary balloons coming from Gaza, will get compensation as well.

Shai Berman, who heads the Israel Restaurants Association, said his group would be seeking aid for all small and medium-sized businesses.

Inspectors were already out on Tuesday to assess direct damage to homes and other property, which is covered up to a legally-set ceiling by the government. But the state doesn’t compensate for losses like jewelry, artwork or cash that is lost when a home or business is rocketed.

Indirect damage, such as the cost of lost business, are more difficult to assess and harder to win compensation for, creating a lot of frustration for victims.

In the summer of 2014, the time of Israel’s last big conflict with Hamas, Ben-Attias had opened his sports bar a month before the fighting, in time for the World Cup, and was hosting 400 people a day. “We were hurt a lot and we didn’t know if we would be compensated or not,” he said. “In the end, we didn’t get properly compensated for our losses because we weren’t able to show our business was worse off than in previous years.”

The Israel Hotels Association said Tuesday that fighting in the south has affected hotels all over Israel, not just in the south. “The impact on the tourism sector isn’t limited only to the areas of fighting. … The sector is extremely sensitive to security problems and their impact is immediate,” it said.

Gal Mor, who is head of development for Abraham Hostel Tours, said his hotels haven’t been affected yet.

“We haven’t seen a big wave of cancellations,” he said. “Nevertheless,, experience shows that if the situation continues and people are thinking about where to take their next vacation, they certainly aren’t going to pick Israel, and will go somewhere else.”

Given the situation, he said a solution in the form of a “security net” had to be found, which he said he hoped would emerge from a meeting scheduled for the next few days between the Hotels Association, insurance industry executives and the Tourism Ministry.

Amir Levy, the ministry’s director general, sought on Tuesday to play down the impact of the fighting on tourists, saying that Israel was no more dangerous than Europe, which has had to cope with terror attacks on its soil.

“Israel is one of the safest countries in the tourism world,” he said. “Beyond that, security personnel are found at every tourist site and the result is that the level of security for tourists is very high.”

Bank Leumi, Israel’s second-largest lender, lifted third-quarter net profit 14% on higher interest income and lower expenses, Israel’s second-largest lender said Tuesday. The bank earned 936 million shekels ($253 million), up from 820 million a year earlier and handily beating forecasts for 853 million shekels, according to a Reuters poll of analysts. Earnings were boosted by gains from asset sales by its Leumi Partners unit and higher profits in the United States, the bank said. Lower provisions for bad debts and a favorable inflation environment helped, too. The bank declared a quarterly dividend of 375 million shekels, representing 40% of quarterly net income. Leumi’s Tier 1 ratio, which measures equity capital as a proportion of risk-weighted assets, was 11.25% at the end of September, down from 11.43% at the end of 2017. Return on equity rose to 121.2% from 10.3% a year earlier. Leumi shares finished down 0.9% at 24.10 shekels. (Michael Rochvarger)

Mizrahi Tefahot's profits soar but it refrains from paying dividend again

Mizrahi Tefahot, Israel’s third-largest bank, saw its third-quarter net profit soar 74% from a year ago but said it would refrain for a second time from paying a quarterly dividend. The bank earned 454 million shekels ($123 million); a year ago profits were weighed down by a one-time charge linked to a new labor agreement. Profit exceeded forecasts for 390 million shekels, according to a Reuters poll of analysts. Mizrahi said that due to the U.S. investigation into the bank’s alleged role in helping American clients evade U.S. taxes, it would not pay a dividend for the quarter. Mizrahi didn’t set aside any further money for future penalties in the case, but it has already allocated 587 million shekels. The bank’s Tier I capital ratio slipped to 10.11% at the end of September from 10.16% a year earlier. Mizrahi shares ended up 0.6% at 66.40 shekels. (Michael Rochvarger)

Brookland bonds tumble after property developer says it will have to reschedule debt

The Tel Aviv-traded bonds of Brookland Upreal plunged Tuesday after the U.S. property company said the night before that it sought to reschedule debt. “The company’s board has concluded there is uncertainty regarding the company’s ability to meet its current liabilities, including ambiguity regarding its ability to meet payments to the company’s bondholders as of December 2019,” Brookland told the Tel Aviv Stock Exchange.

“Responsibility and caution requires us to open preliminary negotiations with holders of the company’s debt (series Aleph and Bet)," the company said, adding that it was crafting a plan to restructure its liabilities. Moshe Cohen, Brookland’s internal auditor, said he was stepping down, saying he could not get the financial data he needed to do his job. Brookland’s problems surfaced this week after TheMarker reported that the company had suffered cash flow problems after failing to sell assets. The price of Brookland’s bonds dropped 46%, leaving them with a yield topping 60%. (Eran Azran)

Franklin Templeton launches Israel operations

Franklin Templeton Investments entered the $67 billion Israeli retail market Tuesday after the government allowed foreign firms to offer offshore products directly to investors. Previously, such investments had to be distributed through an Israeli manager or bank, which increased fees. “Over the years, we have been witnessing Israeli investors’ increasing preference for foreign investments,” Jenny Johnson, president and chief operating officer of Franklin Templeton, said at the opening of the group’s new office in Tel Aviv. Although assets under management of domestic funds investing in foreign securities have more than doubled in the past three years to $7.7 billion, a lack of choice means they still account for only 12% of total assets, she said. Franklin Templeton, which has $724 billion in assets under management, appointed Uzi Yitzhak to head its business in Israel, where the firm also registered two mutual funds. (Reuters)

Tel Aviv shares end higher despite edginess over Gaza fighting

After a shaky start, Tel Aviv shares entered positive territory early in the afternoon Tuesday. But trading remained volatile throughout the day during this week of fighting between Israel and Gaza militants. The TA-35 and TA-125 indexes both ended up exactly 0.24% to close at 1,648.24 and 1,484.21 points, respectively, on turnover of 1.1 billion shekels ($300 million). Drug stocks did well, with Perrigo adding 1.4% to end at 241.90 shekels and Opko Health extending gains with a 1.7% increase to 13.46. Teva, however, rose only 0.5% to 87.20. Oil Refineries Ltd. advanced 2.1% to 1.89 despite a sharp drop in quarterly net profit to $16 million from $92 million a year earlier. Matrix fell 2.2% to 43.10 after it said profits declined 9% to 30.9 million shekels. Brainsway fell 2.2% to 24.47 after it reported a quarterly loss despite higher revenues. The stock had risen 12.5% in the three previous sessions. (Guy Erez)

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1.6653488Wed, 14 Nov 2018 01:30:17Reuters וTheMarkerWed, 14 Nov 2018 01:30:09In a case of high boardroom intrigue, the Italian phone group Telecom Italia sacked its Israeli CEO, Amos Genish, while he was away on business in Asia on Tuesday.

Genish was appointed last year to run the under-performing former monopoly by its then-controlling shareholder, French media group Vivendi. But since then directors backed by activist fund Elliott have wrested control of the board. Genish was viewed by some directors as an obstacle to their campaign for a more aggressive shake-up at the company.

Telecom Italia, which said in a statement that it would meet on Sunday to appoint a new CEO, gave no explanation for the abrupt departure, which Genish condemned as a Soviet-style putsch.

Speaking a few hours after the board stripped him of his executive powers, Genish told Reuters that the environment inside TIM was dysfunctional and that several directors had been campaigning against him for months.

Genish said he was concerned about the future of the company and wanted to remain on the board. “I personally will and am committed to do anything to fight and defend the rights of all shareholders from my position as a board member.

Although born in Hadera, holds a degree from Tel Aviv University and worked in Israeli high-tech, Genish has spent most of his career outside the country.

He was among the cofounders of Global Village Telecom, a Israeli-founded Brazilian telecommunications company, that eventually was bought by France’s Vivendi. He then worked for Vivendi and later became CEO of Telefonica Brasil / Vivo before moving to Telecom Italia.

Vivendi reacted angrily to what it called a mean and cynical maneuver by some board members who moved secretly against Genish, convening the board while he was overseas on business.

“We decry, we condemn the destabilization behind this decision and the disgraceful methods. We reserve all our rights to defend all shareholders interests,” a Vivendi spokesman said.

Elliott, which pulled off a boardroom coup in May when it secured two thirds of the seats on the Telecom Italia board, responded by saying that Vivendi had rebuffed previous attempts at dialogue.

“We are open, and remain open, to a dialogue between us as shareholders of Telecom Italia,” an Elliott spokeswoman said.

Could Amazon end up as No. 2 this time? The e-commerce giant plans to roll out 3,000 cashier-free Amazon Go stores by 2021, but Trigo Vision is one step ahead. The Tel Aviv-based startup said Tuesday it reached an agreement with Super-Sol, Israel’s largest supermarket chain, to install its automated retail platform in 272 stores. That could make Super-Sol the first grocery chain globally to offer shopping that calculates shoppers’ tabs as they pick items off the shelf and lets them leave the store without waiting on a checkout line, Trigo said. “We believe our cooperation with Trigo will transform the shopping experience and will minimize our customers’ friction points in the stores,” said Super-Sol CEO Itzik Abercohen. Trigo says its computer-vision and data-collection technology provides precise identification of products with far fewer cameras than competing systems. The company emerged from stealth in July with a seed round of $7 million funding by investors Hetz Ventures and Vertex Ventures Israel. (TheMarker Staff)

Startup led by former Mossad chief Tamir Pardo nabs $22 million in new capital

XM Cyber, an Israeli cybersecurity startups that counts ex-Mossad boss Tamir Pardo as one of its founders, said on Tuesday it raised $22 million from investors. The money was raised from Macquarie Capital, Nasdaq Ventures, Our Innovation Fund and UST Global, among others. It follows a $10 million seed round with Swarth Group that brings XM Cyber’s total fundraising since it was founded two years ago to $32 million. The company said it would use the funding to accelerate growth through expanded sales, marketing and engineering programs. Its Penetration Testing technology helps keep corporate computer networks safe by mimicking the behavior of real hackers work. It continuously simulates attacks and exposes a network’s blind spots. CEO Pardo has a team of 40 in Israel, Australia and the U.S., most of them hackers who once worked for Israel’s security and intelligence services. Its customers include financial institutions and critical infrastructure organizations in North America, Europe, Israel and Australia. (Irad Atzmon Schmayer)

SuperUp, a rare Israeli startup based outside of the Tel Aviv tech center, said on Monday it had raised $15 million in a seed funding round for what it calls the world’s first e-commerce marketing platform. Most of the new capital is coming from a private investor based in New York who has declined to reveal his name. SuperUp was formed in 2015 by CEO Roy Ittach, and today employs 60 people at its offices in the southern city of Ashdod. Ittach, who served in army technology units and then worked at the Israeli company Amdocs, said SuperUp aims to make online shopping easier for smartphone users, who struggle with websites designed to be seen from a PC. “The idea behind the company came after the smartphone revolution over the last decade. Today, 77% of all internet data passes through mobile devices,” he explained. “It’s a tiring business when you’re using a smartphone.” (Irad Atzmon Schmayer)

After stormy negotiations, government signs licensing accord with Microsoft

After tough negotiations, during which the Israeli government threatened not to renew its contract with Microsoft, the two sides finally signed a licensing agreement on Monday. The agreement sets prices and conditions for all government offices to buy and use Microsoft software, including its Windows operating system, Office suite and software to run servers. Treasury officials expressed satisfaction that spending on Microsoft products would remain at current levels of 100 million shekels ($27.1 million) annually and that the government keeps the rights to products it had already purchased. Negotiations between the two sides broke down last August after the treasury said the U.S. company’s demand for a change in license terms would lead to a steep price increase. Treasury officials began preparations for a new era after the current agreement expired at the end of 2018 that would enable government offices to buy non-Microsoft products or make their own deals with the company. (Avi Waksman)

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1.6652106Tue, 13 Nov 2018 14:02:10Meirav ArlosoroffTue, 13 Nov 2018 13:45:02Could Moshe Leon, the man most likely to be Jerusalem’s next mayor after Tuesday’s election, also likely to be the costliest mayor in Israel’s history?

It would well be because Leon could end up being the person who, by the year 2060, will cause tens of thousands of families to fall below the poverty line as the Haredi poverty rate rises to 25%. Per capita GDP growth will be 15% lower than it should have been and the national debt will grow threefold to 170% of GDP, a rate that spells bankruptcy for the State of Israel.

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How could Leon be responsible for all this? The answer is the political deals that everyone involved in is denying to ensure his election victory on Tuesday. The trade-off is this: The ultra-Orthodox parties Shas and Degel Hatorah agree to support Leon in exchange for Leon’s patron, Defense Minister Avigdor Lieberman, softening his stance on the Haredi draft law.

Whether or not there is a deal, the fate of Israel could well be determined these days. Even if Leon loses, the pressure is on Prime Minister Benjamin Netanyahu to come to a compromise, especially as early elections loom.

If the law is passed by the Knesset according to the wording now being finalized by MK David Amsalem (Likud), the dystopian future of slow economic growth and bankruptcy, rising poverty and inequality are almost certain to come to pass.

This isn’t idle speculation; it is the forecast of the Finance Ministry’s chief economist, predicated on the assumption that the levels of education and employment among Israel’s ultra-Orthodox remain at the same low levels they are today. With the Haredi population forecast to triple as a percentage of the national population to nearly a third in 2060, it will means a huge proportion of Israelis won’t be serving in the army, won’t be getting a modern, secular education and won’t be able to fill productive jobs.

The State of Israel simply can’t survive under these conditions.

The deliberations in Amselem’s committee on Haredi army service will decide which direction Israel takes. That is because there is a strong connection between drafting Haredi men and their later integration into the labor market.

If the government abandons targets for drafting more Haredi men and the sanctions that are supposed to be imposed on yeshivot that don’t comply are softened, the effect on the economy will be profound. It will be even worse if the age is raised at which young ultra-Orthodox men can stop studying and go into the labor force with the threat of being drafted.

As it is, the proposed legislation Amselem started with was a compromise that sought to provide enough recruits for the army without upsetting Haredi leaders too much. The annual threshold for the minimum number of Haredi draftees was hardly challenging, in fact it was even lower that the rate of growth right now. It’s now likely that the legislation will be watered down even more as it winds through Amselem’s committee.

The idea that “he who doesn’t serve also won’t work” was enshrined in the Tal Law nearly two decades ago that sought to use the stick of unemployment to coax ultra-Orthodox men into the army. In fact, the real victim was secular Israelis, who ended up subsidizing the lives of the Haredi population: We educated the men to sit in a yeshiva all day at our expense.

The formula of “no army service, no work” should be dispensed with, but the pending legislation sustains it by setting the age at which a Haredi man is free to enter the labor market at 24. That means those who don’t enlist must remain in the yeshiva till that age. They can only pursue a general education after that age, delaying their entry into the labor market.

Forcing ultra-Orthodox men to remain in the yeshiva until that age is the current situation and the result is that only half of them are in the workforce, versus 88% for non-Haredi Israeli males. Those among the ultra-Orthodox who do work have low rates of productivity.

The cost of this system comes in an equation calculated by Yohanan Plesner, Gilad Malach and Prof. Amichai Cohen of the Israel Democracy Institute. They found that in order to get 417 Haredi draftees every year, some 14,000 Haredi men ages 22-24 are stuck in yeshivot.

Whether it’s a local one for Jerusalem or a national one, the deal means the Knesset debate will be go quickly without lawmakers spending the time to understand and weigh the impact of the law they are voting on. Those behind the scenes will be working to water it down.

What will be left is to save the labor market by enabling the ultra-Orthodox to learn secular subjects like math, science and English and get technical and professional training while they are in the yeshiva. That may happen, at least, when they are free to leave they will have workplace skills and not have to learn the three Rs at age 24. Lowering the exemption age to 22 would help, too.

Many will object that this will violate the principle of equal burden, but the threat facing Israel is to immense to let that delay a solution.